Quick answer: Section 269SS bars you from taking a loan, deposit or property advance of ₹20,000 or more in cash. Section 269T bars you from repaying such a loan or deposit in cash. Both must go through an account-payee cheque, an account-payee bank draft, or a prescribed electronic mode such as UPI or NEFT. Break either rule and the penalty equals the full amount — 100% of the cash involved.
Cash feels simple. A friend lends you ₹25,000 in an emergency, you hand it back in cash a month later, and nobody thinks twice. The Income-tax Act thinks twice. Two short sections — 269SS and 269T — put a hard ₹20,000 ceiling on cash loans and deposits, and the penalty for crossing it is the whole amount. This guide explains both sections in plain words: what they cover, how the ₹20,000 limit is counted, who pays the penalty, the few exceptions, and what changed under the Income-tax Act, 2025.
What is Section 269SS?
Section 269SS says no person shall take or accept any loan, deposit or specified sum of ₹20,000 or more except through an account-payee cheque, an account-payee bank draft, the electronic clearing system through a bank account, or another prescribed electronic mode.
Three points matter here.
First, the section targets the person who takes the money, not the person who gives it. If your friend hands you ₹30,000 in cash as a loan, you — the borrower — are the one who breaks Section 269SS.
Second, it covers three kinds of money: a loan, a deposit, and a specified sum. A specified sum is any amount taken as an advance, or otherwise, in relation to the transfer of immovable property — even if the transfer never happens. So a ₹50,000 cash advance for a flat is caught by Section 269SS just like a cash loan.
Third, the ₹20,000 figure is a trigger, not an allowance. You cannot take ₹19,000 in cash ten times and stay safe. The section counts the aggregate: the current amount, plus any earlier loan or deposit from the same person that is still unpaid. If the total reaches ₹20,000, cash is barred.
Section 269SS has been in the Act since 1984. The specified-sum rule for property advances was added with effect from 1 June 2015.
What is Section 269T?
Section 269T covers the other direction: repayment. No person shall repay any loan, deposit or specified advance in cash if the amount of the loan or deposit, together with the interest payable on it, is ₹20,000 or more. The same bar applies if the aggregate amount of loans or deposits held by that person — in their own name or jointly with someone else — together with interest, is ₹20,000 or more on the date of repayment.
So the repayment rule tests the total outstanding balance, not the instalment you are paying. Borrow ₹16,000, let ₹5,800 of interest build up, and the outstanding is ₹21,800. Paying even ₹5,000 of that in cash breaks Section 269T, because the balance at the time of repayment is above ₹20,000.
Repayment must go through the same permitted modes: account-payee cheque, account-payee bank draft, electronic clearing system, or a prescribed electronic mode. A bank branch repaying a deposit may also credit the amount straight to the depositor’s savings or current account with that branch.
How the ₹20,000 limit is counted
The limit looks small and simple, but the counting rules are what catch people. The table below shows the three tests the law applies.
| Test | What is counted | Example |
|---|---|---|
| Single amount | The loan, deposit or specified sum itself | A ₹25,000 cash loan from a friend |
| Aggregate from the same person | Earlier unpaid loans or deposits from the same person, plus the new one | ₹12,000 taken in March (unpaid) + ₹9,000 taken in June = ₹21,000 |
| Aggregate of specified advances | All specified advances from the same person | Two cash advances of ₹15,000 each for the same flat = ₹30,000 |
For repayment under Section 269T, the test is the amount being repaid plus interest, or the aggregate held with interest — whichever applies. Interest counts. That is the detail most people miss.
Two more facts complete the picture. The limit applies per person, so borrowing ₹15,000 in cash from each of three different friends is fine — each loan is below ₹20,000 and from a different person. And splitting one loan into small cash instalments does not help: the aggregate rule adds them back together.
Which payment modes are allowed?
Any of these modes keeps you on the right side of both sections:
- Account-payee cheque
- Account-payee bank draft
- Electronic clearing system (ECS) through a bank account
- Other prescribed electronic modes under Rule 6ABBA — NEFT, RTGS, IMPS, UPI, and similar bank-to-bank transfers
A plain bearer cheque does not count. The cheque or draft must be account-payee — crossed and marked for the named person’s account only. Cash, bearer cheques and informal IOUs are the modes the law is trying to stop, because they leave no trail.
What is the penalty? 100% of the amount
The penalty is simple and severe: it equals the amount involved. There is no slab, no first-offence discount, and no small fine.
| Breach | Penalty section | Who pays | Penalty amount |
|---|---|---|---|
| Taking a loan or deposit of ₹20,000 or more in cash | Section 271D | The person who accepted the cash | 100% of the amount accepted |
| Repaying a loan or deposit of ₹20,000 or more in cash | Section 271E | The person who repaid in cash | 100% of the amount repaid |
Take a ₹60,000 cash loan and the penalty under Section 271D is ₹60,000 — on top of the loan itself, which you still have to repay. Repay a ₹30,000 loan in cash and the penalty under Section 271E is ₹30,000 — on top of the money you have already handed over.
One change to note: under the Income-tax Act, 1961, these penalties were imposed by the Joint Commissioner. With effect from 1 April 2025, the Finance Act, 2025 moved the power to the Assessing Officer, subject to the prior-approval rule in Section 274(2) where the penalty exceeds the monetary limit set there.
The penalty is separate from any tax on the money itself. If the cash loan is also unexplained income in your hands, tax and interest on that can follow separately.
Can I take a loan of ₹25,000 in cash from a friend?
No. This is the most common misunderstanding about Section 269SS, and the answer is the same whether the lender is a friend, a relative, a colleague or a stranger. The section has no exception for family or friends and no emergency exception. A ₹25,000 cash loan from your brother in a medical emergency breaks the section exactly the same way a loan from a stranger does.
The only defence after the fact is Section 273B — reasonable cause. The tax officer may not levy the penalty if you prove a genuine, reasonable cause for using cash. Courts have accepted it in narrow, fact-specific cases: a medical emergency with no working bank access, or a bank outage that left no other way to pay. A 2025 tribunal order deleted a Section 271E penalty where an NBFC lender had demanded the cash part of EMI repayments on default — but the tribunal said so on the peculiar facts of that case, and said it should not be treated as a general rule. Do not plan around reasonable cause. Plan around the bank transfer.
Can I repay a loan in cash?
Only if the outstanding balance, including interest, is below ₹20,000. The moment the total hits ₹20,000, cash repayment is barred — even a part payment.
Work through the numbers before you pay. Add the principal and the interest due. If the sum is ₹20,000 or more, pay by UPI, NEFT, IMPS or an account-payee cheque. Keep the bank statement or the UPI reference. If the tax department ever asks, that record is your proof that the repayment went through a permitted mode.
Property advances count too — the “specified sum” rule
Since 1 June 2015, Section 269SS also covers any sum taken as an advance in relation to the transfer of immovable property. The law calls this a specified sum, and it applies even if the deal falls through later.
So if a buyer gives you ₹50,000 in cash as an advance for your flat, and the sale never happens, Section 269SS is still broken and the penalty is still ₹50,000. The same advance taken by cheque or UPI is fine. This rule sits next to the TDS rule on property purchases — if you are buying property, read our guide to TDS on property purchase under Section 194IA as well, because cash and TDS are checked separately.
Exceptions — when cash is still allowed
Sections 269SS and 269T do not apply to every transaction. Cash of ₹20,000 or more is still permitted where the other side is:
- The Government — Central Government, State Government or a local authority
- A banking company, a post office savings bank, or a co-operative bank
- A corporation set up by a Central, State or Provincial Act
- A Government company
- Any other institution, association or body notified by the Central Government in the Official Gazette
So repaying ₹40,000 in cash to a co-operative bank against your loan is not a breach. Taking a ₹1 lakh loan in cash from a bank is not a breach either — though in practice banks do not lend in cash at all.
There is one more narrow exception in the statute: where both people in the transaction have only agricultural income and neither has any other income chargeable to tax, Section 269SS does not apply. Both conditions must hold. If either person has salary, business or any other taxable income, the exception is gone.
Worked examples
| Situation | Section | Result |
|---|---|---|
| Friend lends you ₹25,000 in cash for a hospital bill | 269SS | Breach. Penalty ₹25,000 under Section 271D, on you |
| You borrow ₹60,000 in cash from a colleague | 269SS | Breach. Penalty ₹60,000 under Section 271D, on you |
| You borrowed ₹16,000; interest of ₹5,800 has built up; you repay ₹5,000 in cash | 269T | Breach. Outstanding ₹21,800 is above ₹20,000, so any cash repayment breaks the section. Penalty on the amount repaid |
| You split a ₹50,000 loan into three cash instalments of ₹17,000, ₹17,000 and ₹16,000 | 269SS | Breach. The aggregate from one person is ₹50,000. Splitting does not help |
| You repay a ₹30,000 loan to your brother in cash | 269T | Breach. Penalty ₹30,000 under Section 271E, on you |
| You take a ₹50,000 cash advance for selling your flat | 269SS | Breach. A property advance is a specified sum. Penalty ₹50,000 |
| You take ₹19,000 in cash and have no earlier unpaid loan from the same person | 269SS | No breach. Below the ₹20,000 trigger — but keep proof of the amount |
| You repay ₹40,000 in cash to your co-operative bank | 269T | No breach. Banks are exempt |
Check the arithmetic on the third row: ₹16,000 principal plus ₹5,800 interest is ₹21,800, which is above ₹20,000. The size of the instalment does not matter once the outstanding balance crosses the line.
How 269SS and 269T fit with the other cash rules
Sections 269SS and 269T are two of four cash limits in the Act. They are easy to mix up, so here is the full set.
| Rule | What it stops | Limit | Penalty |
|---|---|---|---|
| Section 269SS | Taking a loan, deposit or property advance in cash | ₹20,000 or more | 100% (Section 271D) |
| Section 269T | Repaying a loan, deposit or property advance in cash | ₹20,000 or more (with interest) | 100% (Section 271E) |
| Section 269ST | Receiving cash of ₹2 lakh or more from one person in a day, for one transaction or one event | ₹2,00,000 or more | 100% (Section 271DA) |
| Section 40A(3) | Cash payment of a business expense | More than ₹10,000 per person per day | The expense is disallowed, not a penalty |
Section 269ST, with its ₹2 lakh limit, has its own guide on this site: Section 269ST cash limit — ₹2 lakh rule, penalty and Section 186. And if you withdraw large cash from your own bank account, a different rule applies — TDS under Section 194N. Read Section 194N TDS on cash withdrawal for the ₹1 crore limit and the 2% rate.
Cash gifts from relatives are a separate question from cash loans. A gift from a close relative is tax-free with no limit, but a gift from a friend above ₹50,000 is taxable. Our gift tax guide explains the ₹50,000 rule, and clubbing of income explains when income from money you give to family is taxed in your hands instead.
What changed under the Income-tax Act, 2025
The Income-tax Act, 2025 took effect on 1 April 2026. The cash-loan limits did not change — only the section numbers did. For returns of FY 2025-26 (assessment year 2026-27), the old 1961 Act numbers still apply. From tax year 2026-27, use the new numbers.
| Rule | Income-tax Act, 1961 (FY 2025-26) | Income-tax Act, 2025 (from 1 Apr 2026) |
|---|---|---|
| Taking a loan or deposit in cash | Section 269SS | Section 185 |
| Repaying a loan or deposit in cash | Section 269T | Section 188 |
| Penalty for taking in cash | Section 271D | Section 450 |
| Penalty for repaying in cash | Section 271E | Section 453 |
| Receiving ₹2 lakh or more in cash | Section 269ST | Section 186 |
| Penalty for receiving ₹2 lakh or more in cash | Section 271DA | Section 451 |
The limits, the permitted modes and the 100% penalty are the same under both Acts. Only the numbers moved.
Common mistakes to avoid
- Taking a cash loan from family and thinking the law does not apply. It applies to any person. There is no relative exception.
- Repaying in cash because the loan itself was taken by cheque. The repayment rule is separate. A clean loan taken by bank transfer still cannot be repaid in cash above ₹20,000.
- Forgetting the interest. The 269T test adds interest to the principal. A ₹16,000 loan with ₹5,800 interest is already over the line.
- Splitting a large loan into small cash parts. The aggregate rule adds them up.
- Paying a property advance in cash. Advances for immovable property are specified sums under 269SS.
- Assuming no TDS means no tax problem. No TDS is deducted on a cash loan, but the 100% penalty under 271D or 271E applies anyway, and unexplained cash can still be taxed as income.
- Throwing away the proof. Keep the bank statement, UPI reference or cheque copy for every loan and repayment. The mode of payment is the whole defence.
Frequently asked questions
What is the cash loan limit under Section 269SS?
The limit is ₹20,000. You cannot take or accept a loan, deposit or specified sum of ₹20,000 or more in cash. The amount must come through an account-payee cheque, an account-payee bank draft, or a prescribed electronic mode such as UPI, NEFT, RTGS or IMPS. Earlier unpaid amounts from the same person count toward the ₹20,000.
Can I take a loan of ₹25,000 in cash from a friend in an emergency?
No. Section 269SS has no exception for friends, relatives or emergencies. Taking ₹25,000 in cash breaks the section, and the penalty under Section 271D equals the full ₹25,000, payable by you as the person who accepted the cash. Take it by UPI or cheque instead — it takes a minute and removes the risk entirely.
Can I repay a loan in cash?
Only if the outstanding loan plus interest is below ₹20,000. Section 269T bars cash repayment once the amount, with interest, reaches ₹20,000. The penalty under Section 271E equals the amount repaid in cash and falls on the person who repaid. Pay by bank transfer and keep the reference number.
Does Section 269SS apply to loans from family members?
Yes. The section applies to any person — friend, relative, colleague or stranger. There is no family exception. The only exceptions are for the Government, banks, post office savings banks, co-operative banks, statutory corporations, Government companies and notified institutions, plus the narrow case where both people have only agricultural income.
Does 269SS apply to advances for buying property?
Yes. Since 1 June 2015, any sum taken as an advance in relation to the transfer of immovable property is a specified sum under Section 269SS. A cash advance of ₹20,000 or more for a flat or a plot breaks the section even if the sale never goes through.
What if I split a ₹50,000 loan into cash instalments below ₹20,000?
It still breaks the section. Section 269SS counts the aggregate of all loans or deposits taken from the same person. Three cash instalments of ₹17,000, ₹17,000 and ₹16,000 add up to ₹50,000 from one person, so the whole amount is caught and the penalty is ₹50,000.
What are the new section numbers under the Income-tax Act, 2025?
Section 269SS is now Section 185 and Section 269T is now Section 188. The penalties moved too: Section 271D is now Section 450 and Section 271E is now Section 453. The ₹20,000 limit and the 100% penalty are unchanged. The new numbers apply from 1 April 2026; returns for FY 2025-26 still use the old numbers.
Official sources
- Income Tax Department e-filing portal — incometax.gov.in
- Income Tax Department, Government of India — incometaxindia.gov.in
Reviewed by Asuthod Rathod, CA
Last updated: 12 November 2026
Disclaimer: This article explains tax law in simple words for general information. It is not tax advice. Section numbers and limits change with Finance Acts and notifications — check the official portal or ask a qualified tax professional before acting on your own case.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.