Section 271DA: Penalty for Receiving ₹2 Lakh+ in Cash in a Single Day

While many taxpayers are aware of the ₹20,000 limit for loans (Section 269SS), there is a much broader and more dangerous provision that covers any receipt of money: Section 269ST.

For Assessment Year 2026-27, the department is using bank data and SFT notifications to identify individuals who receive large cash payments for property, luxury goods, or even family settlement. The penalty for this mistake is a staggering 100% of the amount received.

1. The Three "No-Go" Zones of Section 269ST

A person is prohibited from receiving ₹2 Lakh or more in cash in the following three scenarios:

1. Per Person per Day: You cannot take ₹2 Lakh+ in total from Mr. A in a single day, even if it is for 10 different reasons.
2. Single Transaction: You cannot sell a car for ₹3 Lakh and take the payment in three installments of ₹1 Lakh each in cash over three different days. Since it's a "Single Transaction," the total cash cannot exceed ₹1.99 Lakh.
3. Single Event/Occasion: You cannot take cash from different people relating to one event (like a wedding) if the total event-based cash exceeds the limit (though this is primarily targeted at event managers and caterers).

2. The 100% Penalty: Section 271DA

If you violate the above rules, the Receiver (not the giver) is penalized under Section 271DA.

• The Math: Total Cash Received = ₹5,00,000. Penalty = ₹5,00,000.
• The Catch: This penalty is in addition to any income tax you might owe on that money.

Is there any escape? The penalty can only be waived if you prove to the Joint Commissioner that there was a "Good and Sufficient Reason" for taking the cash (e.g., medical emergency in a remote area where banking was impossible). Generally, "I didn't know the law" is not accepted.

3. Does it apply to Gifts? (The Relative Myth)

This is the most common tax trap in India.

• Gift Tax Rule (Section 56): Gifts from relatives are tax-free.
• Cash Receipt Rule (Section 269ST): Taking ₹2 Lakh+ in cash is a violation even if it is a gift from a relative.

Scenario: Your father wants to give you ₹5 Lakh to buy a house. If he gives you a cheque, it is 100% tax-free. If he gives you ₹5 Lakh in cash and you deposit it, the department will not tax it as "income," but they will impose a ₹5 Lakh penalty for violating Section 269ST.

4. Exclusions: When is it Allowed?

The restriction does NOT apply to:

• Government/Banks: Receipts by the Government, any banking company, post office savings bank, or co-operative bank.
• Withdrawals: It does NOT apply when you withdraw your own money from the bank. You can withdraw ₹10 Lakh in cash from your own account (though TDS might apply if it's over ₹20 Lakh/₹1 Crore).
• Specific Business Models: Transactions specifically exempted by the CBDT (very few exist).

Legal Reference: The Prohibition

The law aims to curb the circulation of physical currency in large-ticket transactions.

Section 269ST of the Income Tax Act— "No person shall receive an amount of two lakh rupees or more— (a) in aggregate from a person in a day; or (b) in respect of a single transaction; or (c) in respect of transactions relating to one such event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account."

Common Mistakes with Section 271DA

1. Splitting Bills to Avoid detection: Selling property or goods worth ₹10 Lakh and making 6 bills of ₹1.6 Lakh each is useless. The department links these via the "Single Transaction" or "Person/Day" rule.
2. Assuming the "Giver" is at fault: In most cash rules (like 40A(3)), the person paying loses the deduction. In Section 269ST/271DA, the Person who takes the money is destroyed by the 100% penalty.
3. Hospitals and Emergency Situations: While courts are lenient for medical emergencies, you must maintain hospital admission records and proof of bank holidays/unavailability to avoid the penalty.

Conclusion

To simplify your business and personal transfers, never accept more than ₹1,99,000 in cash from any source for a single purpose. Always insist on a digital transfer for anything substantial.

If you are dealing with family loans, read the ₹20,000 Limit Rule (Section 269SS). If you are receiving a gift specifically for a wedding, check our Wedding Gold and Cash Guide. For assistance with an SFT alert on high-value receipts, see our SFT Response Guide. For high-value transactions, refer to the Faceless Assessment survival guide.