Section 269ST of the Income Tax Act restricts anyone from receiving ₹2 lakh or more in cash from the same person. The limit applies if the amount is received in a single day, in a single transaction, or across related transactions for the same event or occasion.
Introduced by the Finance Act, 2017, this rule applies to the receiver, not the payer. If someone violates it, the penalty can equal the entire amount received in cash. Splitting the payment into smaller amounts does not avoid the rule if the payments relate to the same person and purpose.
Important update: The Income Tax Act, 2025 replaced the Income Tax Act, 1961 from 1 April 2026. The cash receipt rule is now covered under Section 221(1) instead of Section 269ST. The ₹2 lakh limit, trigger conditions, and penalty remain the same. Only the section number has changed.
Key Takeaways
- No person can receive ₹2 lakh or more in cash from one person in a day, in a single transaction, or for one event, whichever applies first.
- The restriction falls entirely on the receiver; the person paying in cash faces no penalty under this provision.
- Splitting a payment into smaller cash instalments doesn’t help, tax authorities look at the aggregate tied to the same person, transaction, or event.
- Government bodies, banking companies, post office savings banks, co-operative banks, and transactions covered under Section 269SS (loans and deposits) are exempt.
- The penalty equals the full amount received in violation, imposed under the provision formerly numbered Section 271DA.
- Cash withdrawals from banks and post offices are not restricted by this section, regardless of amount.
- Since 1 April 2026, this provision is cited as Section 221(1) of the Income Tax Act, 2025, replacing the old Section 269ST citation.
What Does Section 269ST Restrict?
You cannot receive ₹2 lakh or more in cash in any of these situations:
1. From one person in a single day: All cash received from the same person on the same day is added together, even if it is split across multiple payments.
Example: A jeweller sells jewellery worth ₹3 lakh to one customer. The customer pays ₹1.5 lakh in the morning and ₹1.5 lakh in the evening. This violates Section 269ST because the total cash received from the same person in one day exceeds ₹2 lakh. The penalty applies to the jeweller, not the customer.
2. For a single transaction: The total cash received for one transaction counts, even if the payment is made over several days.
Example: A seller receives ₹1.5 lakh in cash on one day and another ₹1.5 lakh the next day for the same sale. Since both payments are for one transaction, the total ₹3 lakh violates the limit.
3. For one event or occasion: Cash received from the same person for a single event, such as a wedding or a bulk order, is added together, even if paid in parts.
Example: A caterer receives ₹1 lakh for food, ₹1.5 lakh for decoration, and ₹1.5 lakh for tent services from the same client for one wedding. Even if the client pays on different days, the law treats the total ₹4 lakh as cash received for one event. This violates the rule.
Who Does This Section Apply To?
Section 269ST applies broadly, covering:
- Individuals receiving large cash payments, such as property sales, high-value purchases, or personal loan repayments.
- Businesses, especially in retail, healthcare, real estate, and hospitality, where high-value cash transactions are common.
- Non-profit and charitable entities, which must comply even when receiving cash donations.
- Professionals, including those receiving cash fees or consulting payments above the threshold.
Exemptions From Section 269ST
The restriction does not apply to receipts by:
- The government
- Any banking company
- A post office savings bank
- A co-operative bank
- Other persons or receipts notified by the Central Government
- Transactions already covered under Section 269SS (cash loans and deposits), which are governed separately
This section does not cover cash withdrawals from banks or post offices. It applies only to cash receipts, not withdrawals.
Penalty for Violating Section 269ST
Violating this rule can result in a penalty equal to the entire cash amount received. The penalty is imposed under the provision previously known as Section 271DA.
For example, if you receive ₹5 lakh in cash in violation of the rule, the penalty is ₹5 lakh. It applies to the full amount, not just the amount above the limit.
The tax authorities may waive the penalty if the recipient shows a valid and sufficient reason for the violation. They assess each case individually.
Cash Transaction Limits Under Income Tax
Section 269ST is one of several provisions restricting cash dealings in India. Here’s how it fits alongside the others:
| Provision | What It Covers | Cash Limit |
| Section 269ST | Cash receipts (per day/transaction/event) | ₹2,00,000 |
| Section 40A(3) | Cash business expenditure | ₹10,000 |
| Section 269SS | Cash loans and deposits accepted | ₹20,000 |
| Section 269T | Cash repayment of loans and deposits | ₹20,000 |
Note: Under the Income Tax Act, 2025, these provisions carry different section numbers. Confirm current citations before relying on them for compliance documentation.
How to Stay Within the Cash Receipt Limit?
Many violations happen by mistake, such as accepting split cash payments. These simple steps can help you stay compliant:
- Use digital payment methods like NEFT, RTGS, UPI, account payee cheques, or bank drafts for payments of ₹2 lakh or more.
- Do not split cash payments across different days or bills. The limit is based on the person, transaction, or event.
- Keep clear transaction records to show the source and purpose of every payment.
- Train employees who collect payments to identify and refuse cash above the limit.
- Seek advice from a tax professional for high-value transactions, such as property deals, weddings, or bulk orders.
