Section 269ST and section 40A(3)
Income-tax cash limits
Section 269ST of the Income-tax Act, 1961 prohibits receiving ₹2 lakh or more in cash from one person in a day, for one transaction or for one event, and section 40A(3) disallows a business expense paid in cash above ₹10,000 to one person in a day.
The two rules face opposite directions. Section 269ST is about money coming in: receiving ₹2,00,000 or more otherwise than by account payee cheque, account payee draft or a bank electronic mode is prohibited, and section 271DA imposes a penalty equal to the whole amount received — on the person who received it. The limit applies three ways: in aggregate from one person in a day, in respect of a single transaction, or for transactions relating to one event or occasion from one person.
Section 40A(3) is about money going out. A business expense paid in cash to one person in a day above ₹10,000 is not allowed as a deduction — ₹35,000 where the payment is to a transporter for plying, hiring or leasing goods carriages. It is not an offence; the business simply cannot claim the expense. Rule 6DD of the Income-tax Rules, 1962 lists exceptions.
Both catch everyday situations in wholesale that no single invoice shows: a regular customer settling several bills in cash on one visit, or a supplier's agent paid in cash for a delivery. Both are visible in a day's cash book — if anyone looks before the day is over.
Section numbers here are those of the Income-tax Act, 1961. The Income-tax Act, 2025 applies from 1 April 2026 under its own numbering.
Key facts
- s.269ST: ₹2,00,000 or more — 'or more', so exactly ₹2 lakh is caught.
- s.271DA penalty: equal to the amount received.
- s.40A(3): above ₹10,000 per person per day; ₹35,000 for transporters of goods carriages.
- UPI, NEFT, RTGS, IMPS and account payee cheques are not cash for either rule.
- s.269ST in force from 1 April 2017 (Finance Act 2017).
Who this affects
Every business that takes or makes payments in cash.
How YarnTally handles it
On every plan, the customer receipt form blocks a cash receipt that would take one customer to ₹2 lakh or more in a day, or against one bill; an admin can override only with a written reason kept on an append-only log. The 'one event or occasion' limb cannot be worked out from data, and the form says so. Cash paid to a mill or on an expense above the s.40A(3) limit is warned and the acknowledgement recorded, and a compliance view that reads the money tables directly lists cash that arrived by import or API too. Not tax advice.
See what else it doesReviewed September 2026. This is general information about how these rules work, not tax or legal advice, and thresholds and due dates do change. Check your own position with your chartered accountant before acting on it.