Restricting High-Value Cash Transactions in India : Clause 186 of the Income Tax Bill, 2025 Vs. Section 269ST of the Income Tax Act, 19612

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....e evolving landscape of tax law, Clause 186 of the Income Tax Bill, 2025, seeks to continue and potentially refine this regulatory approach, reflecting both continuity and change in legislative priorities. This commentary provides a detailed analysis of Clause 186, exploring its structure, objectives, and implications, and offers a comprehensive comparative analysis with Section 269ST, highlighting similarities, differences, and the broader policy context. Objective and Purpose Legislative Intent and Policy Rationale The principal objective behind both Section 269ST and Clause 186 is to curb the proliferation of high-value cash transactions, which are often associated with unaccounted money, tax evasion, and the shadow economy. By mandat....

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....ions relating to one event or occasion from a person: This is an anti-abuse measure, ensuring that a series of related transactions connected to a single event (e.g., a wedding, business event, or purchase) are not artificially separated to circumvent the law. Permitted Modes: The provision enumerates the acceptable modes for such receipts: * Account payee cheque * Account payee bank draft * Electronic clearing system through a bank account * Any other electronic mode, as prescribed The explicit mention of "any other electronic mode, as prescribed" grants flexibility to the government to expand the list of permissible digital payment mechanisms, accommodating technological advancements. 2. Exceptions (Sub-section 2) Clause 186(2....

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....ing process, which could lead to evolving compliance requirements as new payment technologies emerge. 4. Penalties and Enforcement While Clause 186 itself does not specify penalties, it is expected that corresponding penal provisions will exist elsewhere in the Bill, mirroring the approach u/s 271DA of the existing Act, which imposes a penalty equal to the amount received in contravention of Section 269ST. Comparative Analysis with Section 269ST of the Income Tax Act, 1961 1. Structural and Substantive Similarities * Threshold and Modes: Both provisions establish a two lakh rupees threshold and restrict receipts above this amount to specified banking channels (account payee cheque, bank draft, electronic clearing system, and prescribe....

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....ns found in Section 269ST. This may signal an effort to simplify statutory drafting or to consolidate definitions in a separate interpretive section. * Reference to Prescribed Modes: Both provisions empower the government to specify additional electronic modes, but Clause 186's formulation ("as prescribed") may be interpreted as a more general delegation to subordinate legislation. 3. Policy Continuity and Change The close resemblance between Clause 186 and Section 269ST demonstrates policy continuity, indicating that the government remains committed to restricting high-value cash transactions as a tool against tax evasion. However, any changes in the cross-referenced sections (from 269SS to 185) may reflect an updated approach to t....

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....nesses must ensure that cash receipts from customers or counterparties do not breach the threshold, whether in a single transaction, multiple transactions in a day, or in connection with a single event. This requires robust accounting systems, staff training, and periodic audits. * Record-Keeping: The need to monitor cumulative receipts from each person daily, and to identify transactions linked to the same event, increases the complexity of record-keeping, especially for entities with high transaction volumes. * Sectoral Impact: Sectors traditionally reliant on cash (e.g., retail, hospitality, real estate, wedding services) may face significant adjustments, potentially accelerating the shift towards formal banking channels. 2. For Ind....