ACCEPTANCE OR REPAYMENT OF LOAN AND ADVANCE ABOVE RS. 20000

Income Tax Act, 1961 has put a restriction on acceptance and giving loan in cash above Rs. 20,000.00. Many of the people are not clear about the exact provision under the act and are thus making unnecessary wrong conclusions.

In this post we are going to discuss the section 269SS and 269T of Income Tax Act. 1961. These sections i.e. Section 269SS covers acceptance of loan and section 269T covers repayment of loan. There are other Section 271D and Section 271E they talk about penalty to be incurred if the sections 269SS and 269T are not followed.

ACCEPTANCE OF LOAN:

SECTION 269SS

No person shall, after the 30th day of June, 1984, take or accept from any other person (hereafter in this section referred to as the depositor), any loan or deposit otherwise than by an account payee cheque or account payee bank draft if,—

(a)  the amount of such loan or deposit or the aggregate amount of such loan and deposit ; or

(b)  on the date of taking or accepting such loan or deposit, any loan or deposit taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid ; or

(c)  the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b),

is  twenty thousand rupees or more

Thus it is clear from the above section that your aggregate loan from any person should not exceed Rs. 20000. People are often confused that they can take loan in installment of less that Rs. 20000 but it is not correct. your loan amount should not be more than Rs. 20000, even if taken in 100 different installments.

PENALTY FOR ACCEPTING LOAN ABOVE RS 20000

Section 271D says that

a person takes or accepts any loan or deposit in contravention of the provisions of section 269SS, he shall be liable to pay, by way of penalty, a sum equal to the amount of the loan or deposit so taken or accepted.

REPAYMENT OF LOAN-

SECTION 269T

No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit if—

(a)  the amount of the loan or deposit together with the interest, if any, payable thereon, or

(b) the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such loans or deposits,

is twenty thousand rupees or more

Thus it is clear that if you have taken loan than don't repay it more that Rs. 20000 in cash either in single transaction or in any numbers of transactions.

PENALTY FOR REPAYMENT OF LOAN ABOVE RS 20000

Section 271E says that

If a person repays any [loan or] deposit referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, a sum equal to the amount of the [loan or] deposit so repaid.

The crux of the above provision is that, don't take or repay the loan amount either in one or in more than one transaction of amount of Rs. 20000 from a single person. If taken than be ready for penalty of amount equal to loan amount.