The proposed section is envisaged to have a far-reaching effect on the transactions and so much that even withdrawal of money from the banks will also be under the tax net. However, this is only one tremor of the quake and there are more to it. Thus in an attempt to unearth the intricacies, we have tried to collate and analyze a list of questions on the section and its probable impact
- What is the intent behind the insertion?
The intent of the section is clearly to put a restriction on the cash transaction and reduce the quantum of black money which affects the revenue of the government.
2. When is the insertion effective from?
The section will come into effect from the financial year 2017-18 i.e. the assessment year 2018-19 onwards.
3. What do the provisions of the section 269ST say?
No person shall receive an amount of two lakh rupees or more—
- in aggregate from a person in a day; or
- in respect of a single transaction; or
- in respect of transactions relating to one event or occasion from a person,
otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account:
4. What kind of the receipts are within the ambit of the section?
The provisions of the section are applicable to all kinds of receipts irrespective of its nature if the amount is in cash and above the specified limit.
5. Rs 2 lakh cash Transaction limit not applicable on bank withdrawals ?
Rs 2 lakh cash transaction limit, as announced in the Finance Bill, 2017, will not be applicable on withdrawals from bank, cooperative bank or a post office savings account.
6. What are the instances that may trigger application of section 269ST?
The transaction is applicable to all such cases where the amount is received in cash and exceeds the threshold limit of Rs. 2 lacs.
7. Who are all required to comply with the provisions of section 269ST?
The section starts with the words “No persons” and the term person has been defined in the section 2(31) of the IT Act. It includes an individual, HUF, AOP, BOI, Firm company etc. In essence, the scope of the section is very wide as it is applicable to all kind of receipts and on every person receiving such receipts.
8. Are provisions of section 269ST and 269T mutually exclusive?
The provisions of the section 269 ST and 269T are mutually exclusive. Section 269T imposes obligation on the borrower and is restricted to loan and deposits while section 269ST imposes obligation on the recipient and covers all kinds of receipts whether loan, deposits or otherwise.
9. Impact of the section 269ST on NBFCs?
In context of NBFCs, section 269ST would impact the transactions of the following nature, where cash is being used for giving effect to the same
- Receipt of down payment
- Acceptance of security deposit
- Sale of second hand repossessed motor vehicles
- Refurbishment expenses
Where the quantum of the aforesaid transactions exceeds Rs. 2 lacs, the same would be required to be given effect, through banking channels. Hence the transactions which have been given effect to till date in cash terms, the same will not be possible after this section is enforced.
10. What is the consequence for the violation of the section?
It has been proposed to introduce section 271DA in the Income Tax Act 1961, the section provides that if a receipt is received in contravention of the provisions of section 269ST, then a penalty equivalent to the amount of such receipt may be levied on the recipient by the Joint commissioner.