What is exemption under section 269ST?

Section 269ST of the Income Tax Act provides an exemption from the prohibition of cash transactions exceeding Rs. 2 lakh in certain cases. Exemptions include transactions conducted through banks, post offices, and specific government departments. It also applies to transactions where the receiver is a specified entity like a registered political party or any other organisation exempted by the government.

What is section 269SS and 269ST?

Section 269SS prohibits accepting loans or deposits of Rs. 20,000 or more in cash, requiring such transactions to be conducted through banking channels. On the other hand, section 269ST, prohibits receiving cash payments of Rs. 2 lakh or more in a single day from a person, with certain exemptions for transactions through banks and government entities.

What is the limit of section 269ST?

The limit under section 269ST of the Income Tax Act is Rs. 2 lakh. This means that accepting cash of Rs. 2 lakh or more in a single day from a person is prohibited. As per the provisions of section 269ST, transactions above this limit must be conducted through banking channels or electronic methods.

What is the cash receipt limit for 269ST?

Section 269ST limits cash receipts to Rs. 2 lakh or more in a single day from a single person. Any cash payment or receipt exceeding this limit is prohibited. Transactions beyond this limit must be conducted through banking channels or electronic methods to comply with the provisions of section 269ST of the Income Tax Act.

Is 269ST applicable to farmers?

Yes, section 269ST is applicable to farmers. It prohibits receiving cash payments of Rs. 2 lakh or more in a single day from a single person, regardless of the nature of the business or occupation. Farmers must also adhere to this limit and conduct transactions of Rs. 2 lakh or more through banking channels or electronic methods.

What is Section 269ST analysis?

Section 269ST of the Income Tax Act is aimed at curbing large cash transactions by prohibiting the receipt of Rs. 2 lakh or more in cash from a single person on a single day. It applies to all types of transactions, including business and personal dealings, and mandates that such payments be made through banking channels or electronic means.

What happens if a cash receipt exceeds Rs. 2 lakh?

If an individual or entity receives cash exceeding Rs. 2 lakh in a single day from one person, they violate Section 269ST of the Income Tax Act. This results in a penalty equal to the amount received. For example, if Rs. 3 lakh is received in cash, the penalty would be Rs. 3 lakh. This provision aims to curb large, unaccounted cash transactions and ensure financial transparency.

What are the exceptions to Section 269ST compliance?

Section 269ST has specific exceptions. Transactions involving government institutions, banking companies, post offices, cooperative banks, and other notified entities are exempt from its restrictions. Additionally, receipts by business correspondents of banks and farmers’ sales to agriculture markets are also excluded. These exemptions acknowledge the unique financial requirements of such entities while maintaining the act’s goal of reducing unaccounted cash transactions and promoting tax compliance.

What is the amendment in Section 269ST of Income Tax Act?

The Finance Act, 2023 has amended Section 269ST of the Income Tax Act. Previously, the penalty for receiving an amount in cash exceeding the prescribed limit was equal to the amount received in cash. However, the amendment has increased the penalty to an amount equal to the amount received in cash or Rs. 5 crore, whichever is lower.

What is Section 269ST of the Income Tax Act?

Section 269ST of the Income Tax Act limits large cash transactions to reduce black money and improve transparency. It prohibits any person from receiving Rs. 2 lakh or more in cash from one person in a single day, for a single transaction, or for one event or occasion. If this rule is violated, the receiver may have to pay a penalty equal to the amount received in cash.

How does Section 269ST affect cash transactions?

Section 269ST restricts receiving Rs. 2 lakh or more in cash in certain situations. You cannot accept this amount from a single person in one day, for a single transaction, or for related transactions. If you break this rule, you may have to pay a penalty equal to the cash amount received. The rule encourages digital payments and helps reduce tax evasion and unaccounted cash transactions.

Is Section 269ST applicable to all businesses?

No. Section 269ST does not apply to all businesses in every situation. It applies to any person or business receiving cash of Rs. 2 lakh or more in a single transaction, from one person in a day, or for one event or occasion. However, the rule does not apply to government bodies, banks, post offices, co-operative banks, or transactions that are specifically exempt under the Income Tax Act.

Why was Section 269ST introduced in the Income Tax Act?

Section 269ST was introduced to reduce large cash transactions and encourage transparent financial dealings. It helps the government track high-value payments, curb tax evasion, and limit the use of unaccounted money in the economy. Under this provision, a person cannot receive Rs. 2 lakh or more in cash in certain situations. Promoting digital and banking transactions also improves accountability and supports a more transparent tax system.

What are the implications of Section 269ST on financial reporting?

Section 269ST affects financial reporting by requiring businesses to record cash receipts accurately and ensure they do not exceed the prescribed limit. Any violation can attract a penalty equal to the amount received in cash. Proper documentation, accounting records, and payment tracking help maintain compliance. Businesses should also encourage digital payments or banking channels instead of large cash transactions to reduce compliance risks and improve financial transparency.

Section 269ST of Income Tax Act - Latest Update 2026

Section 269ST of Income Tax Act

Section 269ST of the Income Tax Act restricts cash receipts of ₹2 lakh or more from a single person in a day, for a single transaction, or related transactions for one event. Such payments must be made through account payee cheques, demand drafts, or approved electronic payment modes to ensure transparency and tax compliance.

3 min

03-July-2026

Section 269ST of the Income Tax Act was introduced to reduce large cash transactions and improve financial transparency in India. It prohibits individuals and businesses from accepting cash of more than Rs. 2 lakh from a single person in a day. The restriction also applies when the amount is received through multiple cash transactions or for a single event or occasion. This provision encourages the use of traceable payment methods, helping reduce black money, tax evasion, and money laundering. Following Section 269ST is mandatory, as non-compliance can attract penalties. It supports a transparent tax system and promotes responsible financial transactions across the country.

What is 269ST of income tax act?

Section 269ST is a section of the Income Tax Act 1961 that restricts individuals and entities from receiving cash of Rs. 2 lakh or more in a single day from a single person or entity. Section 269ST was introduced in the year 2017, and its provisions came into effect from 1st April 2017. Under the section, cash transactions of Rs. 2 lakh or more are not allowed, and the liability for restricting such transactions falls on the receiver and not the payer. Hence, taking a sum of money of Rs. 2 lakh or more is disallowed while the payer is not held responsible under the purview of section 269ST of the Income Tax Act.

Under the provisions of section 269ST of the Income Tax Act, no individual or entity should receive,

An aggregate sum of Rs. 2 lakh or more from an individual or entity in a single day.
Rs. 2 lakh or more as a single transaction.
Rs. 2 lakh or more for an occasion or one event from a single person or entity.

Also read: Income Tax Slab for FY 2026-27

Applicability of section 269ST on loan repayment

Section 269ST of the Income Tax Act limits the receipt of large amounts in cash to encourage digital payments and reduce unaccounted money. Under this section, no person can receive Rs. 2 lakh or more in cash from a single person in one day, for a single transaction, or for multiple transactions linked to one event or occasion. However, this rule does not apply to transactions already covered under Sections 269SS and 269T, which specifically govern the acceptance and repayment of loans, deposits and specified advances. Loan repayments of Rs. 20,000 or more must follow the rules under Section 269T and should be made through approved banking or electronic payment modes instead of cash. Certain entities, such as the Government, banks, post office savings banks, co-operative banks and other notified institutions, are exempt from these provisions. Failure to follow the applicable section may attract penalties under the Income Tax Act.

Penalty under Section 269ST

Here are the details of the penalty amount under section 269ST of the Income Tax Act:

Penalty threshold limit: Under section 269ST of the Income Tax Act, the penalty is equal to the amount received in cash that exceeds the prescribed limit. Hence, if cash receipts of Rs. 2 lakh or more are received from a single person on a single day in cash, the penalty imposed will be the same amount as the cash received in contravention of the section.
Applicability of penalty: The penalty under section 269ST of the Income Tax Act applies on every transaction in a day of Rs. 2 lakh or more individually. For example, if you receive Rs. 3 lakh in cash from a single person on a single day, the penalty would be Rs. 3 lakh.
Scope of penalty: The penalty under section 269ST of the Income Tax Act applies to all individuals and entities, including businesses, professionals, and other organisations, irrespective of their nature or size. The CBDT (Central Board of Direct Taxes) issued a specific clarification stating that the provisions of Section 269ST do not apply to cash receipts by a cultivator/farmer for the sale of agricultural produce. This exemption was introduced to protect rural economies where banking infrastructure might be limited.

Implications of Section 269ST

Section 269ST has encouraged individuals and businesses to move from large cash transactions to banking and digital payment methods. This improves transparency, helps reduce unaccounted cash transactions, and supports better tax compliance. The section also makes it easier for tax authorities to track high-value transactions through formal financial channels. However, businesses that depend heavily on cash, especially in areas with limited banking facilities, may need to change their payment practices. Following Section 269ST helps taxpayers avoid penalties and maintain proper records. Using account payee cheques, bank drafts, or electronic payment methods is the safest way to comply with the law.

What are the exclusions under the 269ST Income Tax Act?

Although the provisions of section 269ST of the Income Tax Act apply to receiving Rs. 2 lakh or more in cash from a single person in a single transaction, there are some exemptions. Here are the entities exempted from the provisions of section 269ST of the Income Tax Act:

Government transactions: Payments received by the government, local authorities, or any entity specified by the government are exempt from the provisions of section 269ST of the Income Tax Act.
Transactions through banking channels: For transactions covered under Section 269ST, payments of Rs. 2 lakh or more must be made through approved banking channels instead of cash. Permitted modes include an account payee cheque, account payee bank draft, electronic clearing system (ECS), or other prescribed electronic payment methods to ensure transparent and compliant transactions.
Specified payments: Section 269ST of the Income Tax Act may exclude specific types of payments or entities as notified by the Indian government or listed in any other section of the Income Tax Act.

Example of Section 269ST of Income Tax Act

Here are examples of all three specific provisions under section 269ST of the Income Tax Act:

Situation 1: An aggregate sum of Rs. 2 lakh or more from an individual or entity in a single day:

Section 269ST of the Income Tax Act prohibits the receipt of a sum of Rs. 2 lakh or more in cash from a single person in a single day in aggregate. For example, if you're a car dealer and a customer buys a car worth Rs. 2.5 lakh and pays in cash; the penalty applies to you as the recipient because the total cash received from that individual exceeds the limit. Even if you try to split the payment into smaller transactions, the total amount from the same person remains the same.

On the other hand, if you receive Rs. 1.5 lakh in cash for one vehicle from one customer and Rs. 50,000 in cash for another vehicle from a different customer, you are not in violation of section 269ST. This is because the cash payments from each individual are below the specified limit of Rs. 2 lakh and come from separate people.

Situation 2: Rs. 2 lakh or more as a single transaction:

Section 269ST of the Income Tax Act prohibits receiving Rs. 2 lakh or more in a single transaction. For example, suppose you are running a construction firm and receive regular daily payments based on the completion of the part of work daily. However, even if you are taking on a large project, you can not accept cash payments on a single day of Rs. 2 lakh or more for any part of the contract, regardless of its duration. The project may be for 1 year or 5 years; the provisions of section 269ST apply to the amount you receive in a single day for a single person. In such a case, you must accept the payment of over Rs. 2 lakh through cheques, drafts, or electronic transfers between banks to comply with the section’s provisions.

Situation 3: Rs. 2 lakh or more for an occasion or one event from a single person or entity.

For example, suppose you are an event planner organising a large wedding event and accept cash payments from clients for various services. According to section 269ST of the Income Tax Act, you cannot receive funds of Rs. 2 lakh or more in cash from any single client in connection with this event, even if the payments are made in multiple instalments. For example, if a client pays Rs. 1.5 lakh for catering services and later gives an additional Rs. 1 lakh for decoration; the total cash received from that client for the event would exceed the Rs. 2 lakh limit, violating section 269ST. To comply with the provisions of section 269ST of the Income Tax Act, all payments should be processed through cheques, drafts, or electronic transfers.

Also read: Section 234A of Income Tax Act

Reasonable causes where no penalty is imposed for violation of 269T

Under Section 269T of the Income Tax Act, certain reasonable causes may exempt individuals or entities from penalties on violations, typically assessed on a case-by-case basis by tax authorities. Valid reasons can include bona fide mistakes, where the taxpayer inadvertently exceeds cash limits due to an oversight without any intention to evade tax or engage in illicit activities. Genuine emergencies, such as urgent medical expenses or unforeseen financial hardships, can also be considered reasonable grounds, especially when immediate access to cash is necessary. Additionally, if the violation occurred due to technical or logistical issues, like a banking failure or temporary unavailability of digital payment methods, authorities may view it leniently. To claim exemption from penalty, taxpayers should provide sufficient evidence to demonstrate their intent was not to circumvent tax laws. Tax officers assess each case individually to determine whether the circumstances genuinely justify the transaction.

Reporting of transactions under sections 269T

Under Section 269T of the Income Tax Act, certain high-value cash transactions must be reported to ensure transparency and curb illegal financial practices. Specifically, the law prohibits individuals or entities from repaying loans or deposits in cash if the amount exceeds Rs. 20,000. Such transactions must be conducted through banking channels, like cheques, bank drafts, or electronic transfers, to create a verifiable trail. Non-compliance with Section 269T requirements can lead to penalties. Financial institutions and reporting entities must adhere to these rules to maintain compliance and ensure their customers’ transactions align with the act’s anti-tax evasion objectives.

So, is there anyone on whom this section is not applicable?

Section 269ST is not applicable to transactions involving the government, banking companies, post office savings banks, or cooperative banks. Additionally, it excludes transactions specifically mentioned in Section 269SS and those that have been officially approved, announced, or published by the central government. In essence, this legislation aims to curtail large cash transactions by individuals, firms, and companies. By reducing cash-based transactions, the government seeks to combat black money and limit opportunities for tax evasion. This measure is anticipated to contribute positively to India's economic development and progress.

Conclusion

Section 269ST of the Income Tax Act is a vital section included in the Income Tax Act 1961 that prohibits accepting cash payments of Rs. 2 lakh or more from a single person in a single day. The main aim of the section is to ensure that large transactions above Rs. 2 lakh do not happen in cash but through banking and electronic channels to ensure effective monitoring and taxation. If you are an individual or run a business, ensure that you adhere to the provisions of section 269ST of the Income Tax Act. If you fail to do so and accept payments of Rs. 2 lakh and more in a day from a single person or entity, you can be penalised equal to the entire amount you accept as cash.

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