Sections 269SS and 269T: Cash Loan and Deposit Limits

Sections 269SS and 269T of the Income Tax Act restrict cash transactions involving loans, deposits, and specified sums. Violating these provisions attracts a penalty equal to the transaction amount.

SECTION 269SS — RESTRICTION ON ACCEPTING CASH
No person shall accept any loan, deposit, or specified sum of Rs 20,000 or more from another person otherwise than by account payee cheque, account payee bank draft, or through the electronic clearing system. The Rs 20,000 limit considers not just the current transaction but also any earlier loan or deposit from the same person that remains outstanding.

SECTION 269T — RESTRICTION ON REPAYING CASH
No person shall repay any loan, deposit, or specified advance of Rs 20,000 or more otherwise than by account payee cheque, bank draft, or electronic transfer. This includes repayment of principal, interest, and aggregate amounts.

PENALTY FOR VIOLATION
Under Section 271D (for 269SS violations) and Section 271E (for 269T violations), a penalty equal to the amount of the cash transaction is levied. From 1 April 2025, these penalties are imposed by the Assessing Officer.

The penalty can be waived if the person proves there was reasonable cause, but this is a high bar in practice.

EXCEPTIONS
Key exceptions to Section 269SS include:
- Government transactions
- Banking companies and cooperative banks
- Post office savings bank transactions
- Transactions by primary agricultural credit societies (PACS) and primary cooperative agricultural and rural development banks (PCARDB) with their members — up to Rs 2 lakh
- Transactions between an agriculturist and a non-agriculturist where the loan is on account of agricultural operations

Section 269T has similar but not identical exceptions — the agriculturist carve-out does not apply to 269T.

PRACTICAL TIP
Always use banking channels for any loan or deposit transaction of Rs 20,000 or more. This applies equally to accepting and repaying. Even between family members or close business associates, a cash loan above the threshold attracts the full penalty.