Mode of repayment of certain loans or deposits - Section 269T & Section 271E - Income Tax - Ready Reckoner - Income Tax

Mode of repayment of certain loans or deposits - Section 269T Applicability No branch of a banking company or a co-operative bank and no other company or co-operative society and no firm or other person shall repay any loan or deposit made with it or any specified advance received by it otherwise than by an account payee cheque or account payee bank draft drawn in the name of the person who has made the loan or deposit or paid the specified advance, or by use of electronic clearing system through a bank account or through such other electronic mode as may be prescribed if- the amount of the loan or deposit or specified advance together with the interest , if any, payable thereon, or the aggregate amount of the loans or deposits held by such person with the branch of the banking company or co-operative bank or, as the case may be, the other company or co-operative society or the firm, or other person either in his own name or jointly with any other person on the date of such repayment together with the interest , if any, payable on such loans or deposits, or Loan or deposit means any loan or deposit of money which is repayable after notice or repayable after a period and, in the case of a person other than a company, includes loan or deposit of any nature. the aggregate amount of the specified advances received by such person either in his own name or jointly with any other person on the date of such repayment together with the interest, if any, payable on such specified advances, S pecified advance means any sum of money in the nature of advance, by whatever name called, in relation to transfer of an immovable property, whether or not the transfer takes place. However where the repayment is by a branch of a banking company or co-operative bank, such repayment may also be made by crediting the amount of such loan or deposit to the savings bank account or the current account (if any) with such branch of the person to whom such loan or deposit has to be repaid Threshold limit The threshold for applicability is twenty thousand rupees or more. Mode of Repayment Section 269T mandates that eligible repayments must be made only through: Account payee cheque Account payee bank draft drawn in the name of the payee Electronic clearing system through a bank account Such other electronic mode as may be prescribed under rule 6ABBA Provision of Section 269ST not apply If repayment of any loan or deposit or specified advance taken or accepted from: Government; Any banking company, post office savings bank or co-operative bank; Any corporation established by a Central, State or provincial Act; Any government company as defined in section 617 of the companies Act, 1956 such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette. Special Provisions for Banking Companies and Co-operative Banks w.e.f. 01.04.2023 In the following case Limit of loans or deposit to be 2,00,000/- instead of 20,000/- where - (a) such deposit is paid by a primary agricultural credit society or a primary co-operative agricultural and rural development bank to its member; or (b) such loan is repaid to a primary agricultural credit society or a primary co-operative agricultural and rural development bank by its member. Meaning of co-operative bank , primary agricultural credit society and primary co-operative agricultural and rural development bank shall have the meanings respectively assigned to them in Explanation to section 80P(4) . Penalty for Failure to comply with the provisions of section 269T [ Section 271E ] Applicability - If a person repays any loan or deposit or specified advance referred to in section 269T otherwise than in accordance with the provisions of that section, he shall be liable to pay, by way of penalty, Quantum of Penalty: The penalty is equal to the amount of the loan or deposit or specified advance so repaid. Authority to Impose Penalty Upto 31.03.2025 - Any penalty imposable under section 271E(1) shall be imposed by the Joint Commissioner. [From 01.04.2025 - Provided that any penalty under section 271E(1), on or after the 1st day of April, 2025, shall be imposed by the Assessing Officer. Inserted vide Section 87 of the Finance Act, 2025 w.e.f. 01.04.2025] Notes:- Section 269T would come into play only when there is actual repayment of loan; merely because loan is assigned by assessee to his wife by way of journal entry, it cannot be said that there is repayment of loan otherwise than by account payee cheque or account payee bank draft, so as to penalise the assessee u/s 271E. [ITO v Dinesh Jain 2015 (4) TMI 1102 - Delhi High Court]