Cash loan limit under sections 269SS and 269T

What do 269SS and 269T cap?

Sections 269SS and 269T of the Income Tax Act stop large loans and deposits from moving in cash. Section 269SS covers taking a loan, deposit, or specified sum, and section 185 of the Income-tax Act, 2025 carries the same rule. Section 269T covers repaying one, matched by section 188 of the 2025 Act.

The aim is a paper trail through the banking system. By forcing these amounts through a bank channel, the law makes an unrecorded loan harder to pass off later as an explained source of money.

What is the cash limit?

The threshold under both sections is ₹20,000. Section 269SS bites when a loan or deposit, added to any amount already outstanding from the same person, is ₹20,000 or more. Section 269T applies the same ₹20,000 line to repayment.

Because the test looks at the aggregate with the same person, splitting one loan into several cash payments below ₹20,000 does not help. The running balance still crosses the line.

Which payment modes are allowed?

A loan or deposit of ₹20,000 or more must move through one of three modes: an account payee cheque, an account payee bank draft, or an electronic clearing system transfer through a bank account. Prescribed electronic modes such as UPI and other digital bank transfers also count.

A plain bearer cheque does not qualify, because the section names the account payee form. The point is that the money lands in a named bank account, not that a piece of paper changes hands.

What is the penalty for a breach?

The penalty equals the amount involved. A breach of section 269SS draws a penalty under section 271D equal to the loan or deposit taken in cash. A breach of section 269T draws a penalty under section 271E equal to the amount repaid in cash.

The penalty is separate from the loan itself, which stays repayable. A taxpayer can escape the penalty only by showing reasonable cause under section 273B for the cash mode.

Who is outside these sections?

Loans and deposits involving the government, a banking company, the post office savings bank, a co-operative bank, or a corporation set up by a central or state Act are outside sections 269SS and 269T. Dealings between two persons who both have only agricultural income are also excluded.

These carve-outs keep the rule aimed at cash loans between ordinary persons, not at regulated banking or agricultural households with no taxable income.

How do I stay compliant?

1. Route any loan or deposit of ₹20,000 or more through a bank channel.
2. Use an account payee cheque, bank draft, or electronic transfer.
3. Track the running balance with each person, not each single payment.
4. Repay the same way; do not settle a loan in cash.
5. Keep the bank records that show the mode used.

Where do businesses go wrong?

• Splitting one loan into cash instalments below ₹20,000.
• Repaying a director or relative loan in cash.
• Using a bearer cheque instead of an account payee cheque.
• Confusing the ₹20,000 loan limit with the ₹2,00,000 receipt limit under 269ST.
• Assuming the penalty is a fraction, when it is the whole amount.

Where are these sections published?

The cash loan rules sit in sections 269SS and 269T of the Income Tax Act, 1961, with penalties in sections 271D and 271E. In the Income-tax Act, 2025 they are section 185 and section 188. For cash receipts on a sale, see section 269ST. Complied AI keeps CBDT / Income Tax updates in one feed, so you can open a circular on cash dealings and read the section beside it.