Ban on Cash Receipts Upto Rs. 2 Lakh: CBDT says Ban shall not apply on One Installment for Loan for NBFCs [Read Circular]

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The Central Board of Direct Taxes (CBDT) today clarified that the prohibition on cash transactions upto Rupees 2 lakhs under section 269ST of the Income Tax Act does not applies to one installment for Loan for Non-Banking Financial Companies (NBFCs).

A new section 269ST has been inserted in the Income-tax Act, 1961(the Act) vide Finance Act, 2017 with a view to promote digital economy and create a disincentive against cash economy. The provision prohibits receipt of an amount of two lakh rupees or more by a person, in the circumstances specified therein, through modes other than by way of an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account. Penal provisions have also been introduced by way of a new section 271DA, which provides that if a person receives any amount in contravention to the provisions of section 269ST, it shall be liable to pay penalty of a sum equal to the amount of such receipt.

A Press release issued by the Board today said that “representations have been received from non-banking financial companies (NBFCs) and housing finance companies (HFCs) as to whether the provisions of section 269ST of the Act shall apply to one instalment of loan repayment or the whole amount of such repayment.”

It was therefore, clarified that “in respect of receipt in the nature of repayment of loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST.”

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