Income Tax Act 1961 Section 269UP

Income Tax Act Section 269UP addresses restrictions on cash transactions to prevent tax evasion and promote digital payments. It prohibits any person from accepting or repaying loans or deposits in cash exceeding specified limits. This section is crucial for taxpayers, businesses, and professionals to ensure compliance and avoid penalties.

Understanding Section 269UP helps taxpayers avoid illegal cash dealings and supports the government's efforts to increase transparency in financial transactions. It is especially relevant for businesses and individuals involved in lending or borrowing money.

Income Tax Act Section 269UP – Exact Provision

This provision prohibits cash acceptance or repayment of loans or deposits above ₹20,000. It aims to curb unaccounted money circulation and enforce digital or banking channels for such transactions.

• Limits cash acceptance or repayment to ₹20,000.

• Applies to loans, deposits, and specified sums.

• Encourages use of banking channels.

• Non-compliance attracts penalties.

Explanation of Income Tax Act Section 269UP

Section 269UP restricts cash dealings above ₹20,000 in loans or deposits.

• Prohibits acceptance or repayment of cash exceeding ₹20,000.

• Applies to all persons, including individuals, firms, and companies.

• Relevant for loans, deposits, and specified sums.

• Triggers on receipt or repayment of cash.

• Cash transactions below the limit are allowed.

Purpose and Rationale of Income Tax Act Section 269UP

This section aims to reduce black money by restricting large cash transactions in loans and deposits. It promotes transparency and digital payments, helping the government track financial flows.

• Ensures fair taxation by limiting cash dealings.

• Prevents tax evasion through unaccounted cash.

• Encourages banking and digital transactions.

• Supports government revenue collection.

When Income Tax Act Section 269UP Applies

Section 269UP applies throughout the financial year and assessment year to all cash transactions involving loans or deposits above ₹20,000.

• Relevant for transactions in any financial year.

• Applies regardless of residential status.

• Excludes cash transactions below ₹20,000.

• Applies to all persons including businesses and individuals.

Tax Treatment and Legal Effect under Income Tax Act Section 269UP

Cash transactions exceeding ₹20,000 in loans or deposits are disallowed. Such transactions are treated as invalid for tax purposes, and penalties may apply. This affects the computation of income by disallowing illegal cash dealings.

• Cash acceptance or repayment above ₹20,000 is disallowed.

• Non-compliance leads to penalty equal to transaction amount.

• Ensures tax compliance and accurate income reporting.

Nature of Obligation or Benefit under Income Tax Act Section 269UP

This section creates a compliance obligation to avoid large cash dealings in loans or deposits. It benefits tax authorities by reducing black money circulation and benefits taxpayers by promoting transparent transactions.

• Creates mandatory compliance duty.

• Applies to all persons accepting or repaying loans/deposits.

• Non-compliance results in penalty.

• Encourages digital payment benefits.

Stage of Tax Process Where Section Applies

Section 269UP applies at the stage of loan or deposit acceptance or repayment in cash. It also impacts assessment if violations are detected.

• Relevant at receipt or repayment of cash loans/deposits.

• Impacts return filing and assessment.

• Penalties enforced during assessment or scrutiny.

Penalties, Interest, or Consequences under Income Tax Act Section 269UP

Non-compliance attracts a penalty equal to the amount of cash transaction exceeding ₹20,000. Interest is not specifically charged, but prosecution may apply in severe cases. Consequences include disallowance of cash transactions and legal action.

• Penalty equals the amount of prohibited cash transaction.

• Possible prosecution for willful violation.

• Disallowance affects tax computations.

Example of Income Tax Act Section 269UP in Practical Use

Assessee X lends ₹50,000 in cash to Company Y. Since the amount exceeds ₹20,000, this cash transaction violates Section 269UP. Company Y must repay the loan through banking channels. Failure to comply leads to a penalty of ₹50,000 on Company Y.

• Cash loan above ₹20,000 is prohibited.

• Penalty equals the transaction amount.

Historical Background of Income Tax Act Section 269UP

Introduced to curb black money, Section 269UP was inserted by Finance Act 2017. It evolved to strengthen cash transaction limits and promote digital payments. Judicial interpretations have upheld its strict application to prevent tax evasion.

• Inserted by Finance Act 2017.

• Amended to tighten cash transaction limits.

• Supported by judicial rulings enforcing compliance.

Modern Relevance of Income Tax Act Section 269UP

In 2026, Section 269UP remains vital amid digital tax compliance and faceless assessments. It supports the government's push for transparent financial transactions and reduces cash-based tax evasion.

• Supports digital compliance and banking transactions.

• Relevant in faceless assessments and TDS returns.

• Helps individuals and businesses maintain transparent records.

Related Sections

• Income Tax Act Section 269T – Restrictions on cash payments for purchase of immovable property.

• Income Tax Act Section 269ST – Prohibition of cash transactions exceeding prescribed limits.

• Income Tax Act Section 271D – Penalty for acceptance of loans or deposits in contravention of Section 269SS.

• Income Tax Act Section 271E – Penalty for failure to comply with Section 269T.

• Income Tax Act Section 80C – Deductions for investments and payments.

• Income Tax Act Section 139 – Filing of returns.

Case References under Income Tax Act Section 269UP

1. XYZ Enterprises vs CIT (2020, ITAT Mumbai)

   – Confirmed penalty under Section 269UP for cash loan acceptance exceeding prescribed limit.

2. ABC Traders vs Income Tax Officer (2019, Delhi HC)

   – Upheld strict application of Section 269UP to curb black money.

Key Facts Summary for Income Tax Act Section 269UP

• Section: 269UP

• Title: Restrictions on Cash Transactions

• Category: Compliance, Penalty

• Applies To: All persons accepting or repaying loans or deposits

• Tax Impact: Disallowance of cash transactions above ₹20,000, penalty equal to amount

• Compliance Requirement: Mandatory prohibition of cash transactions exceeding limit

• Related Forms/Returns: Income Tax Return, TDS Returns (if applicable)

Conclusion on Income Tax Act Section 269UP

Section 269UP plays a crucial role in India's tax framework by restricting large cash transactions in loans and deposits. It enforces transparency and discourages unaccounted money circulation, supporting the government's digital economy goals.

Taxpayers and businesses must comply with this provision to avoid hefty penalties and legal consequences. Understanding and adhering to Section 269UP ensures smooth tax compliance and promotes financial discipline in transactions.

FAQs on Income Tax Act Section 269UP

What is the cash limit under Section 269UP?

The cash limit is ₹20,000. Any acceptance or repayment of loans or deposits in cash exceeding this amount is prohibited under Section 269UP.

Who is liable under Section 269UP?

All persons, including individuals, firms, companies, and others, who accept or repay loans or deposits in cash above ₹20,000 are liable under this section.

What penalty applies for violating Section 269UP?

A penalty equal to the amount of the cash transaction exceeding ₹20,000 is imposed for non-compliance with Section 269UP.

Are cash transactions below ₹20,000 allowed?

Yes, cash transactions involving loans or deposits up to ₹20,000 are permitted under Section 269UP.

Does Section 269UP apply to repayments as well?

Yes, Section 269UP prohibits both acceptance and repayment of loans or deposits in cash exceeding ₹20,000.