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Clarifications In Respect Of Section 269ST Of The Income-tax Act, 1961

Central Board of Direct Taxes (TPL Division), vide Circular No. 22 of 2017 dated 3rd July, 2017, has issued some clarifications in respect of section 269ST of the Income-tax Act, 1961. The contents of the said circular is as follows:

With a view to promote digital economy and create a disincentive against cash economy, a new section 269ST has been inserted in the Income-tax Act, 1961(the Act) vide Finance Act, 2017.

The said section inter-alia prohibits receipt of an amount of two lakh rupees 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 provides that if a person receives any amount in contravention to the provisions of section 269ST, it shall be liable to pay penalty of a sum equal to the amount of such receipt.
2. Subsequently, representations have been received from non-banking financial companies (NBFCs) and housing finance companies (HFCs) as to whether the provisions of section 269ST of the Act shall apply to one instalment of loan repayment or the whole amount of such repayment.

3. In this context, 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.


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The contents of CBDT's Notification No. 57/2017 dated the 03rd July, 2017 is reproduced as under:

S.O. 2065(E) .- In exercise of the powers conferred by clause (iii) of the proviso to section 269ST of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies that the provision of section 269ST shall not apply to the following, namely:-

(a) receipt by a business correspondent on behalf of a banking company or co-operative bank, in accordance with the guidelines issued by the Reserve Bank of India;
(b) receipt by a white label automated teller machine operator from retail outlet sources on behalf of a banking company or co-operative bank, in accordance with the authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007 (51 of 2007);
(c) receipt from an agent by an issuer of pre-paid payment instruments, in accordance with the authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007 (51 of 2007);
(d) receipt by a company or institution issuing credit cards against bills raised in respect of one or more credit cards;
(e) receipt which is not includible in the total income under clause (17A) of section 10 of the Income-tax Act, 1961.

2. The notification shall be deemed to have come into force with effect from the 1st day of April, 2017.

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