Cash Transaction Limits: Sections 269SS, 269T, 269ST 2026

Income Tax Compliance · AY 2026-27

Last reviewed: 25 September 2026. A loan taken in cash, a deposit repaid in cash, or even a large cash sale can trigger a penalty equal to 100% of the amount involved — not because the underlying transaction was illegal, but purely because it moved through cash instead of a bank. Sections 269SS, 269T and 269ST of the Income-tax Act, 1961 exist to force high-value money movement through traceable channels, and businesses and individuals alike fall into these penalties every year by confusing one section's limit with another's. This guide sets out exactly what each section restricts, the two very different thresholds involved, and how the penalties actually get applied.

Which Act applies? Cash transactions from 1 April 2026 (tax year 2026-27 onward) fall under the Income-tax Act, 2025: Section 185 (old 269SS), Section 188 (old 269T) and Section 186 (old 269ST), with penalties under Section 450 (old 271D) and Section 453 (old 271E) and relief under Section 470 (old 273B). Transactions up to 31 March 2026, and penalty proceedings for those years, stay under the 1961 sections. The thresholds are the same under both Acts, so the rules below apply either way; where we use only the 1961 number, read the 2025 section from the table further down.

Section 185 (old 269SS): accepting loans, deposits and advances in cash

Section 269SS prohibits accepting any loan, deposit, or "specified sum" (an advance received in relation to the transfer of immovable property, whether or not the transfer eventually happens) of Rs 20,000 or more otherwise than by an account-payee cheque, account-payee bank draft, electronic clearing system (ECS), or another prescribed electronic mode such as UPI, RTGS or NEFT. The threshold is not per receipt — it applies to the outstanding balance from that lender, so several smaller cash receipts from the same person that add up to Rs 20,000 or more are equally caught.

Exceptions exist where both parties to the transaction are government bodies, government companies, banking companies, co-operative banks, post office savings banks or other institutions notified by the Central Government, and for certain transactions between agriculturists where neither has income chargeable to tax.

Section 188 (old 269T): repaying loans and deposits in cash

Section 269T applies the mirror-image rule to repayment. Repaying any loan, deposit or specified advance — including the interest on it — of Rs 20,000 or more must go back through the same banking channels: account-payee cheque, account-payee draft, ECS or a prescribed electronic mode. A lender who accepted the money by cheque but is repaid in cash is just as exposed as one who accepted the cash in the first place. The exceptions broadly mirror those under Section 269SS.

Section 186 (old 269ST): the broader Rs 2,00,000 cash receipt limit

Section 269ST, inserted by the Finance Act 2017, is a wider and more recent restriction that is frequently confused with the two above — and this is the single most common error seen in cash-limit articles, so it is worth stating plainly: the 269ST threshold is Rs 2,00,000, ten times the Rs 20,000 figure under Sections 269SS and 269T, and it is not limited to loans or deposits at all.

No person shall receive an amount of Rs 2,00,000 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 sale proceeds, professional receipts, cash gifts, or cash collected towards a single function or event — effectively any cash receipt, whether or not money is being borrowed or repaid. Exceptions apply to receipts by the government, a banking company, post office savings bank, co-operative bank, and certain persons or receipts notified by the Central Government.

269SS vs 269T vs 269ST at a glance

Worked examples

Note that in the first two rows the amount itself is well under the Rs 2,00,000 mark that trips 269ST — they are penalised only because 269SS/269T use the much lower Rs 20,000 loan/deposit threshold. Confusing the two thresholds is exactly how businesses end up believing a cash loan or repayment is safe simply because it is under Rs 2,00,000.

How this is different from Section 36(4) (old 40A(3))

Section 40A(3), now Section 36(4) of the Income-tax Act, 2025 for expenses from 1 April 2026, is a related but distinct provision that businesses often lump in with the above three sections — it should be kept separate. It disallows a business expenditure as a tax-deductible expense where the payment to a single person in a day exceeds Rs 10,000 in cash (Rs 35,000 where the payment is made to a transporter for freight). This is a disallowance of a deduction, not a penalty on the recipient, and it applies to ordinary business expenses such as purchases or services — not to loans, deposits or general cash receipts. A single cash payment can, depending on its nature, be examined under 40A(3) on the payer's side and under 269SS/269T/269ST on the recipient's side, so each needs to be checked on its own facts rather than treated as one rule. For a fuller documentation trail around such disallowances, see the tax audit document checklist, which lists the loan and cash-payment evidence an auditor will ask for.

Common mistakes

• Assuming Rs 2,00,000 is the limit everywhere. It is only the 269ST limit for general cash receipts; loans and deposits are capped at Rs 20,000 under 269SS/269T.
• Splitting a cash loan into smaller instalments to stay under Rs 20,000 — the outstanding balance from the same lender is aggregated, so this does not avoid the restriction.
• Treating "loan from a relative" as automatically exempt. There is no blanket family exemption under 269SS/269T; only the specific categories listed in the law (government bodies, banks, certain agriculturists) are excluded.
• Ignoring 269ST because "no loan is involved". Sale proceeds, professional fees and event collections are all within scope once the cash crosses Rs 2,00,000.
• Assuming a reasonable explanation automatically results in a waiver. Section 273B relief must be argued and accepted by the Joint Commissioner on the specific facts — it is not automatic.

These cash-linked entries also surface during a statutory tax audit, where loans, deposits and large cash receipts get specifically reported. If you are checking whether your turnover brings you into audit scope this year, see the Section 44AB tax audit applicability checker, and if a bank facility is involved, cash-heavy books are also one of the reasons MSME loan proposals get returned by credit teams.

Which Act applies: FY 2025-26 vs FY 2026-27

The Income-tax Act, 2025 applies from 1 April 2026. Cash loans, repayments and receipts on or after 1 April 2026 are tested under Sections 185, 186 and 188, with penalties under Sections 450 and 453 and relief under Section 470. Transactions up to 31 March 2026 (FY 2025-26 and earlier), and penalty proceedings for them, continue under Sections 269SS, 269T and 269ST and Sections 271D, 271E and 271DA, even when the proceedings start after 1 April 2026.

In a notice reply, cite the section of the Act that governs the year of the transaction, not the year in which the notice arrives.

Frequently asked questions

This article is for general information based on the law as understood on the date of last review and does not constitute tax advice for any specific situation. Cash-transaction facts, exceptions and penalty relief under Section 273B depend on individual circumstances; please consult a qualified professional before acting on any transaction discussed here.