Last reviewed: 17 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.
Section 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 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 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
| Section | What it restricts | Cash limit | Penalty section | Penalty amount |
|---|---|---|---|---|
| 269SS | Accepting a loan, deposit or specified advance | Rs 20,000 or more | 271D | 100% of amount accepted in cash |
| 269T | Repaying a loan, deposit or specified advance (incl. interest) | Rs 20,000 or more | 271E | 100% of amount repaid in cash |
| 269ST | Receiving cash for any reason — per day, per transaction, or per occasion from one person | Rs 2,00,000 or more | 271DA | 100% of amount received in cash |
Worked examples
| Scenario | Section triggered | Penalty exposure |
|---|---|---|
| Accepting a Rs 25,000 cash loan from a relative | 269SS | Rs 25,000 (271D) — on the person accepting the cash |
| Repaying a Rs 50,000 deposit in cash, including Rs 4,000 interest | 269T | Rs 50,000 (271E) — on the person repaying in cash |
| Receiving Rs 2,50,000 cash from a single customer for one sale invoice | 269ST | Rs 2,50,000 (271DA) — on the seller receiving the cash |
| Collecting Rs 1,80,000 cash on Monday and Rs 60,000 cash on Wednesday from the same customer for one wedding-catering event | 269ST (aggregated per occasion) | Rs 2,40,000 (271DA) — the two receipts are read together as one occasion |
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 40A(3)
Section 40A(3) 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.
Income-tax Act, 2025 renumbering
Under the Income-tax Act, 2025, effective 1 April 2026, these provisions get new section numbers. Section 269SS is commonly mapped to Section 185, Section 269T to Section 188, and Section 269ST to Section 186; the corresponding penalties — 271D, 271E and 271DA — are commonly mapped to Sections 450, 453 and 451 respectively. Treat this as an indicative mapping rather than a settled citation: government utilities, tax software and even professional references can lag during a renumbering transition. Confirm the section number currently in force before citing it in a notice reply, agreement or any other legal document.
Frequently asked questions
What is the cash limit under Section 269SS?
Section 269SS bars accepting a loan, deposit or specified sum (such as an advance for transfer of immovable property) of Rs 20,000 or more in cash. It must be accepted through an account-payee cheque, account-payee draft, ECS or another prescribed electronic mode. The Rs 20,000 threshold applies cumulatively per lender, not just to a single payment.
Is the Section 269ST limit also Rs 20,000?
No. This is the most common confusion on this topic. Section 269ST sets a separate, much higher threshold of Rs 2,00,000. No person may receive Rs 2,00,000 or more in cash in aggregate from one person in a day, or in respect of a single transaction, or in respect of transactions relating to one event or occasion. Section 269SS and 269T deal only with loans, deposits and specified advances at Rs 20,000; Section 269ST deals with cash receipts generally at Rs 2,00,000.
What is the penalty for violating Section 269SS or 269T?
A violation of Section 269SS attracts a penalty under Section 271D equal to 100% of the amount accepted in cash. A violation of Section 269T attracts a penalty under Section 271E equal to 100% of the amount repaid in cash. These are separate penalty sections, one for accepting and one for repaying.
Can the penalty be waived?
Section 273B allows the penalty to be dropped if the person shows good and sufficient reason for the cash transaction. This is not automatic — the taxpayer has to place the reason on record and get it accepted by the Joint Commissioner during penalty proceedings. Absence of a bank account nearby, or a genuine bona fide error, are examples that have been argued; the outcome still depends on the facts and the officer's view.
Does Section 269ST apply to business sale proceeds and gifts, not just loans?
Yes. Unlike Sections 269SS and 269T, Section 269ST is not limited to loans or deposits. It covers any cash receipt — sale proceeds from a customer, cash gifts, cash collected for one event such as a wedding function bill, or any other cash inflow — once it crosses Rs 2,00,000 in the ways described above. A shopkeeper receiving Rs 2,50,000 cash from one customer in a day for goods sold is squarely inside Section 269ST even though no loan is involved.
Is Section 40A(3) the same rule as Sections 269SS/269T/269ST?
No, and this is another frequent mix-up. Section 40A(3) disallows a business expenditure as a tax-deductible expense if paid in cash above Rs 10,000 in a day to one person (Rs 35,000 for payments to transporters). It affects the payer's deduction, not a penalty. Sections 269SS, 269T and 269ST deal with loans, deposits and cash receipts, and attract a separate 100% penalty. A single cash payment can potentially trigger both regimes depending on its nature, so each needs to be checked independently.
Will these section numbers change under the Income-tax Act, 2025?
The Income-tax Act, 2025 renumbers most provisions with effect from 1 April 2026. Section 269SS is commonly mapped to Section 185, Section 269T to Section 188, Section 269ST to Section 186, and the corresponding penalty sections 271D, 271E and 271DA to Sections 450, 453 and 451 respectively. Treat this mapping as indicative — portals, software and even practitioners can lag during the transition — and confirm the current section label before citing it in any legal document or notice reply.
Our income tax team reviews loan, deposit and cash-receipt entries as part of return preparation and tax audit support, so these exposures are flagged before they become penalty notices.
Income Tax Filing Notice Management Talk to usThis 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.