In a great relief for NBFCs (non-bank finance companies) and HFCs (housing finance companies), the Income Tax Department has provided clarification on which transactions will fall under section 269ST in the event of a loan repayment. made in cash.
Section 269ST was inserted into the Income Tax Act 1961 in the last budget. The purpose of introducing this section was to discourage the use of large amounts of cash as a step towards controlling the generation of black money.
This section, among others, prohibits the receipt of an amount of ₹ 2 lakh or more by any person in the circumstances specified therein by means other than through a check from the beneficiary of the account or a bank draft from the beneficiary of the account or the use of an electronic clearing system via a bank account.
Penal provisions have also been introduced through a new article 271DA, which stipulates that if a person receives an amount in contravention of the provisions of article 269ST, he is liable to pay a fine of an amount equal to the amount .
The introduction of 269ST has generated some confusion. So much so that many NBFCs and HFCs have stopped accepting cash payments from their customers.
They made representations to the government to determine whether the provisions of section 269ST of the Act would apply to a single loan repayment installment or to the total amount of that repayment.
“It is specified that with regard to the receipt in the form of a loan repayment by NBFCs or HFCs, the receipt of a loan repayment installment in respect of a loan constitutes a” transaction single “as specified in clause (b) of section 269ST of the law, and all installments paid for a loan need not be aggregated for the purpose of determining the applicability of the provisions of section 269ST”, said one circular published by the revenue department of the Ministry of Finance on July 3.
The clarification clears the confusion caused by section 269ST.