Inserted by the Finance Act 2017, Section 269ST imposes a complete prohibition — not merely a reporting obligation — on receiving ₹2 lakh or more in cash: from a single person in a day, in respect of a single transaction, or in respect of transactions relating to one event or occasion from a person. Where this limit is breached, Section 271DA imposes a penalty of an amount equal to the amount of such receipt on the person who received the cash. This is a 100% penalty — not 10 or 30% — and there is no reasonable-cause exception beyond a specific application to the Joint Commissioner.
Section 269ST, Income Tax Act 1961
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 event or occasion from a person, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system.
Statutory Reference
Real-World 269ST Traps
Wedding Vendors
A decorator receiving ₹50,000 per day in cash from the same family over a 5-day event period has received ₹2.5 lakh from a single person "relating to one event." This likely triggers 269ST even though no single day exceeded ₹2 lakh.
Property Transactions
Any token advance or brokerage payment above ₹2 lakh received in cash from a single buyer creates a 271DA penalty exposure for the recipient, regardless of whether the sale completes.
Medical/Hospital Receipts
Hospitals and clinics are specifically exempt under Rule 6DD for medical treatment costs. However, fees for elective cosmetic procedures or wellness services may not qualify — the exemption is narrower than assumed.
The "one event or occasion" aggregation rule catches most businesses off-guard. A single customer paying for a large catering order in five cash instalments of ₹45,000 each has paid ₹2.25 lakh "for one occasion." Every rupee is exposed to Section 271DA penalty.
— Sami Tax Tax Alerts, May 2024
Cash Management Compliance
- Train your accounts receivable and cashier staff on the ₹2 lakh rule — not just for single transactions but for the daily aggregate and event-based aggregation.
- Maintain a cash ledger by customer that tracks cumulative receipts both daily and by event basis.
- Where a customer insists on cash and the aggregate threatens to breach the threshold: redirect to UPI, RTGS, or account payee cheque — document the attempt in writing.
- If you have already received cash above ₹2 lakh from a customer in a single day or event: do not wait for audit.
- Seek legal advice on how to document and disclose the receipt to minimise penalty exposure.
- Section 271DA penalties can be challenged on facts — particularly on whether the "event" aggregation correctly applies — but the window for such challenges is narrow.