Section 269SS was inserted by the Finance Act, 1984, w.e.f. 1st April 1984, as a measure to counter the proliferation of black money, tax evasion, and unaccounted income. The section mandates that certain monetary transactions (loans, deposits, and specified sums) must be conducted via traceable banking channels.

🔹 Objective:

• Prevent tax evasion through unrecorded transactions in cash.
• Ensure financial transparency and accountability in significant financial dealings.
• Promote the use of banking infrastructure and digital payments.

To Whom Does Section 269SS Apply?

Section 269SS applies to all persons, including:

• Individuals
• Hindu Undivided Families (HUF)
• Partnership Firms / LLPs
• Companies (Private/Public)
• Association of Persons (AOP) / Body of Individuals (BOI)
• Co-operative Societies
• Trusts and Institutions
• Any other legal entity

There is no exemption based on the status or turnover of the person — the section is universally applicable unless specifically excluded.

Transactions Covered Under Section 269SS

You cannot accept the following in cash (₹20,000 or more):

1. Loan

A sum of money borrowed with a contractual obligation to repay with or without interest.

1. Deposit

Money placed by one person with another, repayable on demand or after a specified period.

1. Specified Sum

Defined in the Explanation to Section 269SS:

“Any sum of money receivable, whether as advance or otherwise, in relation to the transfer of an immovable property, whether or not the transfer takes place.”

This includes property booking advances, sale advances, and other real estate-related payments.

Prohibited Mode and Threshold Limit

A person shall not accept any loan, deposit, or specified sum of ₹20,000 or moreotherwise than by:

• Account Payee Cheque, or
• Account Payee Bank Draft, or
• Electronic Clearing System through a bank account, or
• Other prescribed electronic modes under Rule 6ABBA.

Aggregate Limit Explained:

You violate Section 269SS if any of the following is ₹20,000 or more:

1. A single loan/deposit/advance.
2. Aggregate of all loans, deposits, and specified sums from the same person on the date of accepting a new amount.
3. The new amount + any unpaid balance from the same person.

Illustration:

Acceptable Electronic Modes (as per Rule 6ABBA)

The following electronic modes are prescribed for accepting transactions under 269SS:

1. Credit Card
2. Debit Card
3. Net Banking
4. Immediate Payment Service (IMPS)
5. Unified Payment Interface (UPI)
6. Real-Time Gross Settlement (RTGS)
7. National Electronic Funds Transfer (NEFT)
8. BHIM–Aadhaar Pay
9. QR Code-based payment systems
10. Any other banking channel as notified

Circular No. 32/2019 and Rule 6ABBA introduced w.e.f. 01.09.2019.

Exemptions from Section 269SS

Section 269SS shall not apply in the following cases:

1. Government or related institutions

If the loan/deposit/advance is taken from:

• Government (Central or State)
• Banking company, post office savings bank, or co-operative bank
• Government companies (as defined in Companies Act, 2013)
• Corporations established under Central/State/Provincial Act

1. Other Notified Entities

As notified by the Central Government from time to time in the Official Gazette.

1. Transactions between branch and HO

Transfers between a company’s branches and head office are not considered as loan or deposit.

Penal Consequences – Section 271D

Violation of Section 269SS triggers Section 271D, which mandates the following:

🔸 Penalty Amount:

Equal to the amount of loan, deposit, or specified sum accepted in violation.

🔸 Imposed by:

Joint Commissioner of Income Tax (JCIT)

📌Even if the transaction is genuine or interest-free, penalty will still apply unless there is a reasonable cause (Section 273B).

Section 273B – Relief from Penalty (Reasonable Cause)

No penalty under Section 271D shall be imposed if the person proves that there was reasonable cause for failure to comply with Section 269SS.

✔️ Acceptable Examples of Reasonable Cause:

• Urgent hospitalization requiring immediate funds
• Lack of banking facilities (rural or remote areas)
• Illiteracy or ignorance (not accepted in most cases now)
• Bona fide business exigency with documented proof

🛑The burden of proof lies with the taxpayer.

Important Case Laws on Section 269SS

🔹Bhalotia Engineering Works Pvt Ltd (2005)

Multiple transactions from same party must be considered in aggregate for ₹20,000 limit.

🔹 M/s Sunil Sugar Co. Ltd v. DCIT (2021)

Advance against immovable property in cash beyond ₹20,000 is covered under 269SS as “specified sum.”

Special Points to Remember

Connection with Section 269T

Compliance Tips for Taxpayers & Businesses

• Avoid accepting loans or advances in cash beyond ₹20,000 under any circumstances.
• Maintain proper banking records for all such transactions.
• Ensure that partners’ capital or loans are routed through bank.
• Do not accept real estate advances in cash.
• Keep backup of justification for any emergency-based cash acceptance.

Conclusion

Section 269SS is a vital anti-evasion provision that seeks to ensure accountability in monetary transactions by mandating traceable modes of fund transfer for loans, deposits, and property advances. It’s imperative for taxpayers and professionals to ensure compliance, as non-compliance leads to severe penalties, regardless of genuineness of transactions.