The income tax department brought a huge sigh of relief to lakhs of homebuyers on Wednesday by announcing on that buyers one can pay the entire loan amount in cash to any housing finance company (HFC) or non-banking finance company (NBFC) in case every instalment is less than Rs 2 Lakh.
In a circular on July 3, the I-T department said receipt of repayment of loan by the Non-Banking Finance Companies (NBFC) and Housing Finance Companies (HFC) will fall under the purview of section 269ST clause (b) if the repayment of 'one' loan instalment is equal to or above Rs. 2 lakh, according to an Economic Times report .
"All the instalments paid for a loan shall not be aggregated for the purposes of determining the applicability of the provisions of section 269ST."It can be inferred from the circular that the Rs 2 lakh limit will only be applied to a single loan instalment repayment in cash and not to the total of all the instalments.
In the Union Budget on February 1 this year, finance minister Arun Jaitley proposed to ban all cash (payments/ receipts) transactions above Rs 3 lakh beginning April 1, 2017.
The government said such transactions were illegal and would attract penalty. The decision was based on the recommendation of the Special Investigation Team on black money that was set up by the Supreme Court.
On March 21, 2017, the government moved amendments to the Finance Bill 2017 proposing to cap cash transactions at Rs 2 lakh instead of Rs 3 lakh as provided in the Budget.
The government introduced section 269ST during the last Budget to stop use of large amounts of cash in order to control black money.
PROVISIONS OF SECTION 269ST
No person shall receive an amount of two lakh rupees or more-(a) in aggregate from a person in a day; or(b) in respect of a single transaction; or(c) in respect of transactions relating to one event or occasion from a person, otherwise than by an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account.
(a) Government; (b) any banking company, post office savings bank or co-operative bank;(c) transactions of the nature referred to in section 269SS;(d) such other persons or class of persons or receipts, which the Central Government may, by notification in the Official Gazette, specify.
PENALTY FOR NON COMPLIANCE UNDER SECTION 271DA
If a person receives any sum in contravention of the provisions of section 269ST, he shall be liable to pay, by way of penalty, a sum equal to the amount of such receipt. Any penalty imposable under sub-section (1) shall be imposed by the Joint Commissioner. One will have to maintain proper documents to furnish proofs to the income tax department in case of cash payment.