Section 269ST - Rs 2 lakh cash limit - citizen guide 2026

If you are short on time, jump to the everyday traps section below. Selling a car, taking wedding gift cash, or accepting a loan repayment in notes can each cross this line without you knowing.

Section 269ST of the Income Tax Act, 1961 was inserted by the Finance Act 2017 and applies from 1 April 2017. Its goal is simple: push large payments onto bank channels and choke black money. The rule does not tax the money. It bans the cash mode of receiving large sums.

This catches ordinary people, not just businesses. A jeweller, a hospital, a property seller, or a relative collecting wedding gifts can all trip the limit. The penalty is heavy, so it pays to know the three ways you can breach it.

Section 269ST says no person shall receive Rs 2,00,000 or more, otherwise than by an account payee cheque, an account payee bank draft, or electronic transfer through a bank account, in three situations:

1. In aggregate from one person in a day. Add up all cash you take from the same person on the same date. If the total hits Rs 2 lakh, it breaches the limit even if each note bundle was smaller.
2. In respect of a single transaction. One bill or one deal of Rs 2 lakh or more cannot be settled in cash, even if you split the cash across several days.
3. In respect of transactions relating to one event or occasion from one person. Many small cash payments for one wedding, function, or contract are added together.

The threshold is Rs 2,00,000 or more. So Rs 1,99,999 in cash is allowed, but Rs 2,00,000 is not. The limit looks at the receiver's side of each person separately.

A plain example. Dr. Shrawan Kumar Pathak sells an old car for Rs 3 lakh. The buyer hands over Rs 1 lakh on Monday and Rs 2 lakh on Wednesday. It is one transaction (one car). The total Rs 3 lakh in cash breaches section 269ST, and Dr. Pathak, the receiver, faces the penalty.

This is the part most people get wrong. The penalty under section 271DA is levied on the person who receives the cash, not the person who pays it.

Section 271DA states that a person who receives a sum in breach of section 269ST shall pay, by way of penalty, a sum equal to the amount of such receipt. Receive Rs 5 lakh in cash wrongly, and the penalty is Rs 5 lakh. You can effectively lose the whole sum.

The penalty is imposed by the Joint Commissioner. There is one relief: no penalty applies if the receiver proves there were good and sufficient reasons for the breach. That defence is decided case by case and is not guaranteed.

Note: the payer is not penalised under section 271DA. But payers face separate limits elsewhere. Section 40A(3) disallows business expenses paid in cash above Rs 10,000, and section 269SS restricts cash loans and deposits. So both sides have cash rules, just under different sections.

Most breaches are accidental. Watch these common traps.

1. Wedding cash gifts. If one relative gives Rs 2 lakh or more in cash for a single wedding, the receiving family can breach the “one event or occasion” limb. Spread across guests it is fine; the limit is per person.
2. Selling a car or property for cash. A vehicle or flat sold for Rs 2 lakh or more cannot be received in cash, even in instalments. It is a single transaction.
3. Cash loan repayment. Accepting Rs 2 lakh or more back in cash can breach 269ST. Repayment of loans also attracts section 269T separately, so use bank transfer.
4. Jewellers and shopkeepers. A single bill of Rs 2 lakh or more settled in cash breaches the limit for the seller.
5. Cash medical bills. A hospital receiving Rs 2 lakh or more in cash for one treatment crosses the line.
6. Contractors and event payments. Many cash part-payments for one contract or function add up under the “one event” rule.

A practical case. Kashvi Pathak runs a small boutique. A customer orders bridal wear worth Rs 2.4 lakh and pays cash in three visits. Because it is one transaction, accepting the full amount in cash breaches section 269ST, and Kashvi is the one penalised.

Section 269ST does not apply to receipts by:

1. the Government;
2. any banking company, post office savings bank, or co-operative bank;
3. transactions of the nature referred to in section 269SS (such as certain loans and deposits, which have their own rules); and
4. persons, classes of persons, or receipts that the Central Government notifies in the Official Gazette.

To stay safe, follow these habits.

1. Use bank channels above the limit. For any amount of Rs 2 lakh or more, take an account payee cheque, a bank draft, NEFT, RTGS, IMPS, or UPI. Electronic transfer is fully allowed.
2. Never split cash to dodge the rule. Splitting across days or receipts does not help. The “aggregate in a day,” “single transaction,” and “one event” limbs are designed to add it all up.
3. Issue clean receipts. Show the payment mode on every bill so your records prove bank receipt.
4. For weddings and big functions, ask large givers to transfer to your bank account or write a cheque.
5. For property and vehicle sales, insist on banking channels and record the buyer's bank reference.

When you receive money, also check whether it is taxable. Cash gifts and high-value receipts can attract scrutiny. See our guide on tax on gifts from relatives under section 56 and pick the right return using which ITR form to file for 2026-27. If a penalty notice does arrive, read how to reply to a faceless penalty notice before responding. For your wider rights and process, The RTI Playbook is a useful companion.

It applies to the receiver. The ban is on receiving Rs 2 lakh or more in cash. The penalty under section 271DA is paid by the person who received the cash, not the person who paid. Payers face separate cash limits under sections like 40A(3) and 269SS, but not the 271DA penalty.

The penalty under section 271DA equals the full amount of cash received in breach. If you wrongly take Rs 4 lakh in cash, the penalty can be Rs 4 lakh. The Joint Commissioner imposes it. No penalty applies if you prove there were good and sufficient reasons for the breach.

No. Section 269ST adds up cash for a single transaction and for transactions tied to one event, regardless of how many days or receipts you spread it over. Splitting does not avoid the limit. Only the per-person, per-day aggregate is one of three independent tests, and all three must stay under Rs 2 lakh.

Yes, when they relate to one event. If a single person gives Rs 2 lakh or more in cash for one wedding, the receiver can breach the “one event or occasion” limb. The safest route is to ask large givers to transfer money to a bank account or pay by cheque rather than cash.

Yes. Section 269ST only bans cash. Receiving Rs 2 lakh or more by account payee cheque, bank draft, NEFT, RTGS, IMPS, or UPI is fully allowed. Always record the payment mode and bank reference so your books show the receipt came through a banking channel.

• Check any pending sale, loan repayment, or function where you expect Rs 2 lakh or more, and switch the receipt to a bank channel.
• Tell large payers and gift-givers to use cheque, NEFT, or UPI, not cash.
• Review recent cash receipts of the last year for any single deal or event at or above Rs 2 lakh.
• Add the payment mode to every receipt and invoice you issue from today.
• If you already crossed the limit, gather records of why, in case you must show good and sufficient reasons.

• Income Tax Department, Section 269ST, Income Tax Act 1961: https://www.incometaxindia.gov.in/w/section-269st
• Income Tax Department, Section 271DA, Income Tax Act 1961
• Finance Act 2017 (section 269ST effective 1 April 2017)
• Section 269SS, Section 269T and Section 40A(3), Income Tax Act 1961

• Tax on gifts from relatives under section 56
• Which ITR form to file for 2026-27
• How to reply to a faceless penalty notice under 270A