CHAPTER XII — MODE OF PAYMENT IN CERTAIN CASES, ETC.

Section 185 — Mode of taking or accepting Loans / Deposits / Specified Sum

BLOCK 1 : SECTION TEXT (NEW ACT, 2025)

Mode of taking or accepting certain loans, deposits and specified sum.

185. (1) No person shall take or accept from another person any loan or deposit or specified sum, except through— (a) account-payee cheque or account-payee bank draft; (b) electronic clearing system through bank account; (c) other prescribed electronic mode (UPI, IMPS, NEFT, RTGS, BHIM, debit card, etc.) — if the amount of such loan / deposit / specified sum, or the aggregate amount of such loan / deposit / specified sum together with such other loans / deposits / specified sums (if any) accepted earlier from such person, is Rs 20,000 or more.

(2) Carve-outs: Government / banking company / post office / co-operative bank / certain notified institutions; transactions between agriculturists below threshold; transactions where both parties have only agricultural income; etc.

BLOCK 2 : CORRESPONDING SECTION IN OLD ACT (1961)

Section 269SS of the 1961 Act

Section 269SS — No person shall take or accept any loan / deposit / specified sum of Rs 20,000+ except by account-payee cheque / draft / electronic mode. Carve-outs for Government / banking company / post office / co-operative society / agriculturists.

BLOCK 3 : COMMENTARY

Section 185 of the new Act re-states section 269SS of the 1961 Act. The Rs 20,000 threshold for loans / deposits / specified sums is preserved. 'Specified sum' refers to advance towards transfer of immovable property (FA 2014 inclusion) — preventing cash advance for property transactions.

Penalty under Chapter XXI. Violation of s. 185 attracts penalty under s. 271D (now in Chapter XXI of new Act) equal to the amount of the loan / deposit. The Supreme Court in Asstt. CIT v. Dr. Rajiv Agnihotri (2020) 426 ITR 121 (SC) held that s. 271D penalty is not automatic — assessee must be given opportunity to show 'reasonable cause' under s. 273B. The Bombay HC in CIT v. Triumph International Finance India Ltd. (2012) 345 ITR 270 (Bom.) further held that family-loan transactions through journal entries (book entries) are not 'taking' loans for s. 269SS purposes.

Practical takeaways. (i) For real estate transactions: no cash advance above Rs 20,000 even from buyer to seller. (ii) For business owners: family-money rotation through journal entries (no cash movement) is permissible (Triumph International). (iii) For agriculturists: limited carve-outs — verify both parties are agriculturists. (iv) For trust / charitable institution donations: not loans / deposits — outside s. 185.

Sections 186-192 — Other Cash-Transaction Provisions

NEW ACT 2025

Section 186 (formerly s. 269ST) — No person to receive Rs 2 lakh or more in cash in a single day, single transaction, or transactions relating to one event from a single person — except through banking channel. Carve-outs: Government, banking company, post office; tax-paid receipts; transactions notified by CBDT.

Section 187 (formerly s. 269T) — Mode of repayment of loans / deposits / specified advance: through banking channel only, where amount is Rs 20,000 or more.

Section 188 (formerly s. 269SU) — Specified business with turnover > Rs 50 crore must accept electronic payments — RuPay debit card, BHIM-UPI, UPI-QR. FA 2019 introduction.

Section 189 (formerly s. 269SS proviso) — Transitional carve-outs.

Section 190 (formerly Rule 6ABBA) — Prescribed electronic modes for the purposes of this Chapter.

Section 191 (formerly s. 176) — Discontinued business — special tax mode.

Section 192 (formerly s. 174) — Assessment of persons leaving India / dissolved firms / discontinued business — special protective taxation regime.

OLD ACT 1961

Sections 269ST, 269T, 269SU, 174, 176 — Cash-transaction restrictions and discontinued / leaving-India special-charge regimes.

COMMENTARY

Sections 186-192 of the new Act preserve the cash-transaction architecture and the special-charge regime for discontinued / leaving-India cases.

Section 186 (formerly s. 269ST) — the Rs 2 lakh single-day / single-transaction / single-event cash receipt prohibition. Three independent triggers — any of them, if breached, attracts penalty under s. 271DA (Chapter XXI of new Act) equal to the cash receipt. Important note: aggregation is per-person-per-event, not annual. Multiple installments for the same wedding above Rs 2 lakh aggregated trigger the prohibition.

Section 188 (formerly s. 269SU) — Mandatory acceptance of electronic modes: businesses with turnover > Rs 50 crore must accept RuPay / BHIM-UPI / UPI-QR. Failure attracts penalty Rs 5,000 per day (s. 271DB). Push for cashless economy.

Section 191 (formerly s. 176) and 192 (formerly s. 174) — Special protective regimes for discontinued business and persons leaving India. The AO can charge tax for the current tax year before the close of the year if the assessee proposes to leave India / discontinue business; this prevents flight of revenue. Section 192 covers persons leaving India with no intention to return, dissolved firms, and AOPs being discontinued. Section 191 covers discontinued business.

Practical takeaways. (i) For wedding / event organisers: cash receipts must be tracked per-person-per-event under Rs 2 lakh — keep gift register / receipt book. (ii) For F&B / retail businesses with turnover > Rs 50 crore: ensure RuPay / BHIM-UPI POS acceptance. (iii) For NRIs leaving India: section 192 may trigger pre-emptive assessment — plan timing of departure carefully. (iv) Coordinate with PMLA Rs 10 lakh suspicious-transaction reporting threshold.

Chapter XII — At a Glance

Practitioner notes

• All cash transactions above Rs 20K (s. 185) / Rs 2 lakh (s. 186) attract penalty equal to the amount unless reasonable cause shown under s. 273B.
• Family-money journal entries (no cash movement) outside s. 185 (Triumph International).
• Section 188 (s. 269SU) — Rs 5,000/day penalty for non-acceptance of electronic modes by Rs 50 cr turnover business.
• Section 192 (s. 174) — pre-emptive assessment for persons leaving India; advise NRIs / departing executives to plan return-filing in advance.