Income Tax Section 269T-Mode of repayment of certain loans or deposits or specified advances ( New Section 188 )


Section 269T of Income Tax Act — Repayment of Loan/Deposit in Cash :-

Section 269T is an anti-tax-evasion provision. Its main objective is to prevent cash transactions in repayment of loans or deposits so that financial dealings remain traceable.

Below is a clear breakdown.

✅ 1. What Section 269T Says (Basic Rule)

A person cannot repay any:

  • Loan

  • Deposit

  • Specified advance

of ₹20,000 or more in cash.

Repayment must be done only through banking channels.

✅ 2. What Is Covered Under This Section?

Section 269T applies when repayment involves:

✔ Loan
✔ Deposit
✔ Advance related to immovable property
✔ Interest along with principal

If the total amount due is ₹20,000 or more, cash repayment is prohibited.

✅ 3. Allowed Modes of Repayment

Repayment is permitted only through:

  • Account payee cheque

  • Account payee bank draft

  • Electronic clearing system (ECS)

  • Digital banking modes (UPI/NEFT/RTGS etc.)

👉 Any cash repayment above the limit is illegal under this section.

✅ 4. When Does the ₹20,000 Limit Apply?

The restriction applies if:

  • The amount of loan/deposit is ₹20,000 or more, OR

  • Aggregate outstanding amount with interest is ₹20,000 or more

Even if repayment is done in parts, cash is not allowed once the threshold is crossed.

✅ 5. Penalty for Violation

If Section 269T is violated:

➡ Penalty = Amount repaid in cash

This penalty is imposed under Section 271E.

Meaning — if ₹1,00,000 is repaid in cash, the penalty can also be ₹1,00,000.

✅ 6. Exceptions — When Section 269T Does Not Apply

Repayment in cash is allowed when dealing with:

  • Government

  • Banking companies

  • Post office savings bank

  • Cooperative banks

  • Government corporations

  • Other notified institutions

✅ 7. Practical Examples

✔ Example 1 — Cash repayment not allowed

Mr. A took a loan of ₹50,000 from Mr. B.

If Mr. A repays ₹50,000 in cash → ❌ Violation of Section 269T
Penalty = ₹50,000

✔ Example 2 — Splitting payment doesn’t help

Loan outstanding = ₹25,000

Mr. A repays:

₹10,000 cash + ₹15,000 cash

Still ❌ violation — because total repayment exceeds ₹20,000.

✔ Example 3 — Legal repayment

Loan = ₹80,000

Repayment via UPI/bank transfer → ✅ Fully compliant.


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