The last budget included a new tax rule which made cash receipts or payment transactions of Rs. 2 lakh or more illegal and also levied some penalty amount. And as per the yesterday's circular by the income tax department, it appeared that borrowers can now repay the entire loan in cash provided each of the instalment comes to less than Rs. 2 lakhs.
The circular states . "All the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions of section 269ST." The provision implies that the upper limit of Rs. 2 lakh shall apply to only a single loan repayment installment and not on the total of all of the loan instalments.
Thus providing more clarification, the finance ministry's circular said that the rule applies to repayment of a single loan instalment as against the entire loan amount. The last budget incorporated a new section 269STthat prohibits transaction in large amounts to curb black money generation.
The section disallows or prohibits any person to undertake financial transactions of Rs. 2 lakh or more in cash in total from a person in a day, or in respect of a single transaction and for transactions relating to an occasion from an individual.
The penalty provision in case of violation of the Section 269ST has also been stipulated. For it, section 271DA levies the penalty amount on the person who receives cash amount over the specified limit. The amount to be paid as penalty is decided as the amount received in cash.
The circular further clarifies that the NBFC or HFC shall be violating the provisions of Section 269ST only in the case when they receive a single loan EMI of Rs.2 lakh or more in cash.