Section 271E of ITA, 1961 : Section 271E: Penalty For Failure To Comply With The Provisions Of Section 269T

Explanation using Example

Imagine a business owner, Mr. Sharma, who took a cash loan of ₹5,00,000 from his friend Mr. Verma. Later, Mr. Sharma decides to repay the loan to Mr. Verma entirely in cash, which is a violation of Section 269T of the Income-tax Act, 1961, as it prohibits repayment of loans above ₹20,000 in cash. The Income Tax authorities find out about this transaction during an audit.

As per Section 271E of the Income-tax Act, Mr. Sharma would now face a penalty for this repayment method. The penalty would be equal to the amount of the loan he repaid in cash, which is ₹5,00,000. This penalty would be imposed by the Joint Commissioner of Income Tax.