TaxTMI 
TaxTMI 
TaxTMI 
Evolution of Cash Transaction Controls in Indian Tax Law : Clause 188 of the Income Tax Bill, 2025 Vs. Section 269T of the Income Tax Act, 1961
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....direct successor to Section 269T of the Income Tax Act, 1961, which has, since its inception, played a pivotal role in the Indian tax regime's fight against black money and benami transactions. The evolution from Section 269T to Clause 188 represents not only a legislative continuity but also an attempt to modernize and clarify the law in light of changing financial practices and technological advancements. This commentary provides an in-depth analysis of Clause 188, examining its structure, intent, practical implications, and areas of potential ambiguity. It also offers a detailed comparative analysis with Section 269T (excluding the Explanation), highlighting similarities, differences, and the rationale for any modifications. The dis....
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....ersons The clause prohibits these entities from repaying any loan, deposit, or specified advance except through prescribed non-cash modes, if the repayment amount meets or exceeds a specified threshold. 2. Prohibited Modes and Permitted Exceptions Repayment of loans, deposits, or specified advances must be made through: * Account payee cheque * Account payee bank draft drawn in the name of the payee * Electronic clearing system through a bank account * Any other prescribed electronic mode The explicit mention of electronic clearing systems and "other prescribed electronic modes" reflects an acknowledgment of the dynamic nature of payment technologies and provides flexibility for the inclusion of future digital payment methods th....
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....ions recognize the lower risk of tax evasion in transactions involving government or regulated entities. 6. Enhanced Threshold for Agricultural Credit Societies Clause 188(4) substitutes the threshold of "twenty thousand rupees" with "two lakh rupees" in the context of transactions involving primary agricultural credit societies or primary co-operative agricultural and rural development banks and their members. This reflects the unique socio-economic context of rural credit and the practical realities of agricultural financing. 7. Definition of "Loan or Deposit" Clause 188(5) defines "loan or deposit" as any loan or deposit of money which is repayable after notice or after a period, and, in the case of persons other than companies, incl....
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.... not only individual transactions but also the aggregate of all loans, deposits, or specified advances (with interest) held by the person (individually or jointly) on the date of repayment. 4. Threshold Amounts * The standard threshold of twenty thousand rupees is retained in both provisions. * The enhanced threshold of two lakh rupees for transactions involving primary agricultural credit societies or primary co-operative agricultural and rural development banks and their members is also preserved. 5. Exemptions The list of exempted entities is virtually identical, with minor drafting differences reflecting the updated Companies Act reference in Clause 188 (section 2(45) of the Companies Act, 2013) as opposed to the earlier section ....
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....there are no gaps in coverage, particularly in relation to ongoing transactions and the interpretation of terms. The updated statutory references and potential for new electronic modes may necessitate fresh notifications and clarifications from the Central Board of Direct Taxes (CBDT). Ambiguities and Potential Issues * Definition of "Specified Advance": While the intent is clear, the lack of a detailed definition within Clause 188 may lead to interpretational issues, particularly regarding what constitutes an advance "in relation to transfer of an immovable property." * Aggregation Rules: The provision requires aggregation of all loans, deposits, or advances "held by such person" on the date of repayment, including joint hol....
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....ntrols must be established to prevent inadvertent cash repayments above the prescribed threshold. * Periodic training and updates may be necessary for staff to keep abreast of prescribed electronic modes and compliance requirements. 3. Procedural Safeguards The provision's structure, including aggregation rules and specific exemptions, is designed to prevent evasion through structuring and splitting of transactions. The flexibility to prescribe new electronic modes ensures adaptability to technological developments. 4. Penalty and Enforcement Although Clause 188 itself does not specify penalties, non-compliance is likely to attract penal provisions under the Income Tax Act, similar to Section 271E for violations of Section 269T. T....