Sections 269SS, 269T and 269ST restrict cash loans, deposits and receipts under income tax. Know the ₹20,000 and ₹2 lakh limits and 100% penalty exposure.
The Income-tax Act, 1961 has long discouraged cash dealings, and the Union Budget 2026 has reinforced this stance by widening the scope of Section 269ST and tightening data-sharing between banks and the CBDT. If you accept or repay loans, deposits or advances in cash beyond prescribed limits, the penalty is equal to the amount transacted — a 100% hit. Understanding Sections 269SS, 269T and 269ST is therefore essential for every Indian business owner, professional and high-net-worth individual.
Section 269SS — accepting loans, deposits and specified sums
Section 269SS prohibits any person from accepting a loan, deposit or specified sum of ₹20,000 or more otherwise than through account-payee cheque, account-payee bank draft, ECS or any other electronic mode such as UPI, IMPS, NEFT or RTGS. The aggregate is computed across all transactions with a single party. A specified sum is any sum receivable, whether or not as a loan or deposit, in relation to the transfer of immovable property — so cash earnest money or token money is also blocked.
Section 269T — repayment of loans and deposits
Section 269T mirrors 269SS on the repayment side. A person cannot repay a loan or deposit, or a specified advance, of ₹20,000 or more in cash. The threshold considers the aggregate of all amounts payable, including interest, to the same person. This applies to companies, banking companies, co-operative banks, firms and individuals alike.
Section 269ST — universal cap on cash receipts
Introduced to push India toward a less-cash economy, Section 269ST bars any person from receiving ₹2 lakh or more in cash:
- 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.
This covers wedding receipts, property registrations, hospital bills, school fee collections and shop sales. Banks, post offices and government bodies are excluded, but jewellers, builders and event venues are squarely in scope.
Penalties — Sections 271D, 271E and 271DA
Penalty under Section 271D for violating 269SS is equal to the amount accepted; under Section 271E for violating 269T is equal to the amount repaid; and under Section 271DA for violating 269ST is equal to the amount received. These are levied by the Joint Commissioner and are in addition to any tax implications. Reasonable cause under Section 273B can be a defence, but the burden of proof is on the taxpayer.
Practical compliance checklist for FY 2026-27
- Route every loan, advance and security deposit through banking channels
- Configure your billing software to block single-day cash receipts of ₹2 lakh or more from any party
- For property transactions, collect earnest money only via banking channels — record PAN of the payer
- Reconcile cash books monthly and flag any contra entries exceeding ₹20,000
- Train front-office and accounts staff on Section 269ST — most violations are at the cashier desk
Conclusion
Cash-restriction provisions are no longer a niche compliance corner; they are an active enforcement priority. Build banking-first SOPs, document the source of every large credit, and ensure your team understands the ₹20,000 and ₹2 lakh thresholds. A small process change today avoids a 100% penalty tomorrow.
