There is lot of confusion about Sec 269ST after its introduction in Budget'17.This presentation will help you to understand this section. Moreover, this presentation also provides comparison between Sec 40A(3) and Sec 269ST.

1. Sec-269ST(Introducedin Budget,2017)
Cash transaction above 2L
Compiled by,
Rohan Gandhi
Email id:gandhirohan777@gmail.com
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2. About Sec-269ST
As per this provision no person can receive amount of Rs.2L or more in cash from:
 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.
Above mentioned points are explained briefly in next slides.
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3. Who will be Penalized?
 If sec 269ST is violated, the person who receives the amount is liable to pay penalty u/s271DA
of Income Tax Act.
 As per Sec 271DA, penalty is 100% of the amount received by the receiver.
 For e.g.
Mr.A pays Rs. 2,50,000 in a day to Mr.B in cash and for the single transaction. In such a case, Mr.B
is liable to pay 100% penalty of Rs.2,50,000( 269ST violated as received more than 2L on a single
day as well as same person and for same transaction).
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4. Explanation- Aggregate from a person in a
day.
 Here two words are important i.e. from a person and in a day. A person cannot receive more
than 2L from a person in day but he can receive more than 2L from different person in a day.
 For e.g.
-Mr. K pays Rs.3,00,000 in a day to Mr. L in cash and for a single transaction. In such a case Mr. L is
liable to pay 100% penalty of Rs.3,00,000 as sec 269ST is violated.
- Mr. X pays Rs.1,50,000 in cash to Mr. A on 01/04/17, Mr. Y also pays 1,50,000 in cash to Mr. A
on 01/04/17. As a result Mr. A receives 3,00,000( 1.5L+1.5L) on a single day. In such case, Mr. A
would not be liable to pay penalty as the amount received were from different persons as well
as for separate transactions.
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5. Explanation- In respect of a single
transaction.
 In respect of single transaction is a very good condition to curb cash transactions. This condition
would not allow splitting of bills.
 For e.g.
- Mr. C wants to pay Rs.3,00,000 to Mr. D. While, Mr. C is aware of 1st condition (aggregate from a
person in a day) he is unknown to 2nd condition. As a result, Mr. C splits his bill of 3L into 2 bills
of 1.5L each and makes payment to Mr. D. In such case, Mr. D will b liable for a penalty of
Rs.3,00,000 (in respect of single transaction) irrespective of whether two bills received on same
day or not.
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6. Explanation- Transactions relating to one
event or occasion from a person.
 Event or occasion will include marriage, birthday party, concert, etc
 Mehdi Rasam , Sangeet Sandhya , Reception, Marriage will be considered as one occasion of
Marriage.
 For e.g.
- If a birthday party of Mr. Z is held on two different days; one day with friends and other with
family members and decoration contract for both the days is with Mr. T. In such case, if Mr. T
receives payment 1.3L for day 1 and 1.3L for day 2 from Mr. Z in cash , Mr. T will be penalized for
2.6L u/s 271DA for violating Sec 271DA (payment exceeds 2L (2.6L=.3L+1.3L).
-A contractor of marriage cannot receive more than Rs.2L for one event. Here, if the contractor
holds the contract of catering, transportation, etc all such will fall under one contract and will
hold a single limit of 2L.
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7. Other points:-
 This provision will be applicable to exempt income as well as taxable income.
- Exempt income such as agricultural income, gift,etc
 This provision will not apply to transactions referred to in section 269SS and 26ST of income tax
act i.e. loans and deposit from bank.
 Following transactions will also be covered u/s Sec 269ST: Withdrawal of capital profit by
partner of firm in cash and Introduction of capital by partner in firm in cash.
 Withdrawal from bank above 2L will not violate Sec 269ST as per press release from CBDT.
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8. Other points (conti..)
 Allowable mode of receipts does not include: cash, bearer cheque, crossed cheque, and self
cheque.
 Confusion between Sec 40A(3) and Sec 269ST.
-Sec 40A(3): Where the assessee incurs any expenditure in respect of which a payment or
aggregate of payments made to a person in a day, otherwise than by an account-payee cheque
drawn on a bank or account-payee bank draft, exceeds Rs. 10,000, no deduction shall be allowed
in respect of such expenditure.
- Hence, from above defination it is clear that Sec 40A(3) is applicable to payer and Sec 269ST is
applicable to receiver.
- For e.g.
Mr. A pays 3,00,000 in a day to Mr. B in cash and for a single transaction. In such case, Mr. A’s
payment of 3L will be disallowed to him. Moreover, Mr. B is also liable for a 100% penalty of 3L.
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9. Example:
 Mr. G wants to pay Mr K Rs.3,00,000 in a day and for a single transaction. Mr. G is aware of Sec
269ST and hence pays Rs.2,00,000 in cash and Rs. 1,00,000 through a/c payee cheque on a
single day. In such case, the question is whether Mr. K will be penalized?
-Mr. K would not be penalized, as the payment in cash is within the said limit. Moreover, the
payment of Rs.2,00,000 will be disallowed for Mr. G i.e. he has to pay tax on such payment [Sec
40A(3) is violated].
 Mr. F wants to pay 6,00,000 to Mr. O in respect of single transaction. Mr. O splits bill of 6L into 3
bills of 2L (so that Sec 269ST is not violated) and issues all 3 bills to Mr. F. Mr F then makes
payment of all three bills on different days. In such case, the question is whether Mr. O will be
penalized?
-Mr. O will be penalized as he receives the amount more than 2L in respect of a single
transaction. Moreover, the payment of Rs.6L(2+2+2) will be disallowed or Mr. F u/s 40A(3).
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10. Thank you
In case of any query or complaint related to this Presentation, kindly send it to email id: gandhirohan777@gmail.com.
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