In a big relief to NBFCs (non-banking finance compaines) and HFCs (housing finance companies), the Income-Tax Department has come out with a clarification on the transactions that will fall under the purview of Section 269ST in case repayment of loan is made using cash.
Section 269ST was inserted in the Income-Tax Act, 1961 in the last budget. The aim of introducing this section was to discourage the use of large amounts of cash as a step towards controlling generation of black money.
This section, inter-alia, prohibits receipt of an amount of ₹2 lakh or more by a person in the circumstances specified therein through modes other than by way of an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.
Penal provisions have also been introduced by way of a new section 271DA, which states that if a person receives an amount in contravention to the provisions of section 269ST, he shall be liable to pay penalty of a sum equal to the amount.
The introduction of 269ST has generated quite some confusion. So much so, many NBFCs and HFCs alike had stopped accepting cash payments from clients.
They have made representations to the Government seeking to clarify whether the provisions of Section 269ST of the Act would apply to one instalment of loan repayment or the whole amount of such repayment.
“It is clarified that in respect of receipt in the nature of repayment of loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a ‘single transaction’ as specified in clause (b) of Section 269ST of the Act, and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions Section 269ST,” a circular issued by the revenue department in the Ministry of Finance on July 3 said.[“Source-thehindu”]