269SS of Income Tax Act: Regulations and Implications

In Indian tax law, section 269SS of the Income Tax Act is a provision for accepting loans or deposits by individuals or businesses. It specifies that no person shall take any loan from any other person or deposit, or any stipulated sum, if the amount of such loan or deposit or fixed sum is more than twenty thousand rupees, otherwise than by an account payee check or account payee bank draft or use of electronic clearing system through a bank account.

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In other words, if an individual or business wants to accept a loan or deposit of more than Rs 20,000, they must do so by issuing an account payee check or bank draft or by using electronic clearing through a bank account. The purpose of this provision is to discourage the use of cash transactions for accepting loans or deposits, as it makes it easier to track such transactions and helps to reduce the use of cash in the economy.

See also: Section 206C of Income Tax Act

269SS of Income Tax Act: Exemptions

There are several exemptions to Section 269SS of the Income Tax Act provisions. These exemptions are as follows:

Acceptance of loan or deposit from a relative: The provisions of Section 269SS do not apply to the approval of a loan or deposit from a relative. A relative for this provision includes the following:

Husband/wife of the person
Sibling of the person
Sibling of the husband/wife of the person
Sibling of either of the parents of the person
Any blood-related ascendant or descendant of the person
Any lineal ascendant or descendant of the husband/wife of the person

Acceptance of loan or deposit from a banking company, co-operative society which are involved in moving forward the business of banking, or a post office: The provisions of Section 269SS do not apply to the acceptance of a loan or deposit from a banking company, co-operative society which are involved in moving forward the business of banking, or a post office.
Acceptance of loan or deposit in the ordinary course of business: Section 269SS does not apply to accepting a loan or stake in the ordinary course of business.
Acceptance of loan or deposit for business: Section 269SS does not apply to accepting a loan or deposit if a firm or a company takes the loan or deposit.
Acceptance of loan or deposit by a local authority: Section 269SS does not apply to approving a loan or deposit by a local authority.

It is essential to note that these exemptions are subject to certain conditions and limits, as specified in the Income Tax Act. It is advisable to consult a proper professional tax or refer to the Income Tax Act for detailed information on these exemptions.

269SS of Income Tax Act: Penalty on the dispute of Section 269SS

If a person violates the provisions of Section 269SS of the Income Tax Act by taking a loan or depositing any specified sum of more than Rs 20,000 in cash, they may be liable to pay the penalty. The punishment for violation of the provisions of this section is equal to the amount of the loan or deposit, or specified sum, accepted in cash.

For example, if a person accepts a loan of Rs 50,000 in cash, they may be liable to pay a penalty of Rs 50,000.

269SS of Income Tax Act: How is section 269T related to section 269SS?

Another section of income tax, called Section 269T of the Income Tax Act, is related to Section 269SS as it deals with the payment of loans or deposits that have been accepted in violation of the laws of Section 269SS.

Section 269T specifies that no person shall make any payment to any other person, either in loan or in deposit or any other form, if such settlement or the aggregate of such payments made to the payee during the financial year exceeds twenty thousand rupees, otherwise than by an account payee check or account payee bank draft or use of electronic clearing system through a bank account if the payee is liable to pay the penalty under the provisions of Section 269SS.

In other words, if a person has accepted a loan or deposit in contravention of the provisions of Section 269SS, and the payer wants to make a payment to them, they must do so by issuing an account payee check or bank draft or by using electronic clearing through a bank account.

269SS of Income Tax Act: Penalty for violating section 269T

Suppose a person contravenes Section 269T of the Income Tax Act by making a payment to another person in contravention of the provisions of this section. In that case, they may be liable to pay the penalty. The penalty for violating this provision is equal to the amount of the payment made in contravention of the provisions of Section 269T.

For example, if a person makes a payment of Rs 50,000 in contravention of the provisions of Section 269T, they may be liable to pay a penalty of Rs 50,000.