Section 269SS of ITA, 1961 : Section 269Ss: Mode Of Taking Or Accepting Certain Loans, Deposits And Specified Sum

Explanation using Example

Imagine a scenario where Mr. A wants to borrow Rs. 30,000 from his friend Mr. B to cover some emergency expenses. According to Section 269SS of the Income-tax Act, 1961, Mr. B cannot give this amount to Mr. A in cash if the total amount of the loan or the aggregate amount of such loans is Rs. 20,000 or more. Instead, Mr. B must use a cheque, bank draft, or electronic transfer to provide the loan to Mr. A.

If Mr. B ignores this law and gives Mr. A the Rs. 30,000 in cash, both parties could be subject to penalties under the Income-tax Act. However, if Mr. A was borrowing the money from a bank or the government, this section would not apply, and the transaction could legally proceed in cash.