Section 269SS of the Income Tax Act, 1961 prohibits any person from accepting a loan, deposit, or specified sum of Rs 20,000 or more in cash (or by bearer cheque) from another person, requiring such transactions to be conducted through account payee cheque, account payee bank draft, or electronic clearing system. Under Indian law, violation of Section 269SS attracts a penalty equal to the amount of the loan or deposit accepted in cash, imposed under Section 271D.
Legal definition
Section 269SS of the Income Tax Act, 1961 provides:
No person shall take or accept from any other person any loan or deposit or any specified sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed, if — (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum 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 is twenty thousand rupees or more.
Companion provisions:
| Section | Scope | Penalty Section | Penalty Amount |
|---|---|---|---|
| 269SS | Acceptance of loan/deposit ≥ Rs 20,000 in cash | 271D | Amount accepted |
| 269T | Repayment of loan/deposit ≥ Rs 20,000 in cash | 271E | Amount repaid |
| 269ST | Receipt of any amount ≥ Rs 2,00,000 in cash | 271DA | Amount received |
Exceptions — Section 269SS does not apply to transactions with:
- The Government
- Any banking company, post office savings bank, or cooperative bank
- Any corporation established by a Central, State, or Provincial Act
- Government companies as defined under Section 2(45) of the Companies Act, 2013
- Such other institution, association, or body notified by the Central Government
"Specified sum" (introduced by Finance Act, 2015): Any sum of money receivable, whether as advance or otherwise, in relation to the transfer of an immovable property, whether or not the transfer takes place.
How courts have interpreted this term
Asst. CIT v. Om Prakash Mittal [(2005) 93 ITD 466 (ITAT Jaipur)]
The ITAT held that Section 269SS applies to genuine loan and deposit transactions and not to transactions that are merely book entries or adjustments in the books of account. Where the parties demonstrate that no actual cash changed hands and the entries represent adjustments of existing balances, Section 269SS is not attracted. The provision targets the physical acceptance of cash, not accounting entries.
CIT v. Triumph International Finance (India) Ltd. [(2012) 345 ITR 270 (Bombay HC)]
The Bombay High Court held that the penalty under Section 271D for violation of Section 269SS is not automatic — the Joint Commissioner must record satisfaction that there was no "reasonable cause" for accepting cash before levying the penalty. The existence of reasonable cause (such as business urgency, banking holidays, or genuinely exceptional circumstances) is a complete defence under Section 273B. The burden of proving reasonable cause lies on the assessee.
Kanhaiyalal Dugar v. Joint CIT [(2004) 266 ITR 465 (Rajasthan HC)]
The Rajasthan High Court held that transactions between partners and the firm do not constitute "loans" or "deposits" for the purpose of Section 269SS. Capital contributions by partners or withdrawals from the firm are in the nature of capital account transactions, not loans, and are therefore outside the scope of the provision. This interpretation was subsequently endorsed by other High Courts.
Why this matters
Section 269SS is one of the key anti-black money provisions in the Income Tax Act. By requiring all loans, deposits, and specified sums above Rs 20,000 to be routed through banking channels, the provision creates an audit trail that enables the income tax department to trace the movement of money and detect unaccounted income.
For businesses, compliance with Section 269SS is critical because the penalty under Section 271D is absolute in amount — it equals the entire sum accepted in cash, with no proportionality or mitigation (except the defence of "reasonable cause" under Section 273B). A company that accepts a Rs 5 lakh loan in cash faces a penalty of Rs 5 lakh, regardless of whether the underlying transaction was legitimate.
For property transactions, the 2015 amendment extending Section 269SS to "specified sums" (advances for immovable property transfers) was aimed at curbing the widespread practice of accepting part of the property consideration in cash. This amendment, combined with Section 269ST (which caps cash receipts at Rs 2 lakh from 2017), has significantly tightened the anti-cash regime for real estate transactions.
Related terms
Parent concept:
Related anti-evasion provisions:
Related concepts:
Frequently asked questions
What is the penalty for violating Section 269SS?
The penalty under Section 271D equals the entire amount of the loan or deposit accepted in cash. There is no discretion with the penalising authority regarding the quantum — if the contravention is established, the penalty equals the full amount. The only defence is "reasonable cause" under Section 273B, which must be demonstrated by the assessee to the satisfaction of the Joint Commissioner.
Does Section 269SS apply to transactions between relatives?
Yes. Section 269SS applies to all persons without any exemption for relatives or family members. Even a loan received in cash from a parent, spouse, or sibling exceeding Rs 20,000 attracts the provision. The only exceptions are for transactions with the government, banking companies, and specified entities listed in the proviso.
What is the difference between Section 269SS and Section 269ST?
Section 269SS prohibits the acceptance of loans, deposits, and specified sums of Rs 20,000 or more in cash. Section 269ST (introduced in 2017) is broader — it prohibits the receipt of any amount of Rs 2,00,000 or more in cash from a person in a day, in respect of a single transaction, or in respect of transactions relating to one event or occasion. Section 269ST covers all cash receipts (not just loans/deposits), with a higher threshold.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.