TaxTMI 
TaxTMI 
TaxTMI 
Restricting Cash Transaction Regime : Clause 185 of Income Tax Bill, 2025 Vs. Section 269SS of Income Tax Act, 1961
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....ceptions. The provision is a direct successor to Section 269SS of the Income-tax Act, 1961, a long-standing anti-abuse measure that has been central to the Indian tax administration's efforts to curb unaccounted money and the use of cash in the economy. The significance of Clause 185 lies not only in its continuity with the existing legal regime but also in its subtle refinements and the legislative intent to address practical challenges and emerging trends in financial transactions. The comparison with Section 269SS is essential to understand the evolution of the law, the consistency in policy objectives, and the implications for taxpayers and enforcement agencies. This commentary provides a detailed, itemized analysis of Clause 185, e....
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....m taking or accepting from another person any loan, deposit, or specified sum, except through: * an account payee cheque; * an account payee bank draft; * electronic clearing system through a bank account; or * any other prescribed electronic mode. This restriction applies if: * the amount or aggregate amount of such loan, deposit, or specified sum; * the amount or aggregate amount of any previously taken or accepted loan, deposit, or specified sum from the same person, which remains unpaid as on the date of taking/accepting the new amount (whether due for repayment or not); or * the aggregate of the amounts referred to in (i) and (ii) is twenty thousand rupees or more. Interpretation and Legal Principles: * The provision....
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....icultural income and neither has any income chargeable to tax under the Act. Interpretation: * This exception recognizes the unique nature of agricultural income, which is generally exempt from income tax in India, and acknowledges the prevalence of cash transactions in rural/agricultural contexts. * The dual conditions (both parties have only agricultural income and neither has taxable income) are designed to prevent misuse by non-agriculturists. (d) Sub-section (4): Enhanced Threshold for Certain Co-operative Transactions Clause 185(4) stipulates that in the case of deposits accepted by or loans taken from a primary agricultural credit society or a primary co-operative agricultural and rural development bank by its member, th....
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....d Amount Rs. 20,000 (Rs. 2,00,000 for specified co-operative transactions) Same Reflects continuity; higher threshold for rural/agricultural co-operatives Scope Loan, deposit, specified sum Same Both cover advances relating to immovable property ("specified sum") Aggregation Rule Includes current and unpaid previous transactions with the same person Same Prevents circumvention by splitting transactions Exceptions Government, banks, corporations, government companies, notified entities Same Consistent approach, with flexibility for notification Agricultural Income Exception Both parties must have agricultural income and no taxable income Same Targets rural context, prevents misuse Definitions Loan or....
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....ons will exist in the new legal framework. (d) Policy Continuity and Evolution The comparative analysis reveals a deliberate policy of continuity, with refinements to ensure the law remains effective in a changing economic and technological environment. The core anti-evasion rationale remains paramount, but the law is drafted to be flexible and responsive. Ambiguities and Potential Issues in Interpretation * Aggregation Rule: The requirement to aggregate unpaid previous loans/deposits with the same person can be complex in practice, especially for businesses with multiple ongoing transactions. Clarity on reporting and documentation may be required. * Definition of "Specified Sum": While Section 269SS defines "specified sum"....
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.... * Dispute Resolution: Ambiguities in interpretation may lead to litigation, particularly regarding the scope of exceptions and the aggregation rule. Judicial clarification may be required over time. Practical Implications (a) For Taxpayers (Individuals and Businesses) * Taxpayers must ensure that all loans, deposits, and specified sums above the prescribed threshold are only accepted through permissible banking channels or electronic modes. * Non-compliance can attract significant penalties under the corresponding penalty provisions (such as Section 271D under the current regime). * Record-keeping and due diligence become critical, especially in aggregating unpaid balances from previous transactions with the same counterpart....