Cash loan over Rs 20,000 may put families affected by Covid in legal tangle

Mumbai-based Vishal Gupta, who lost his father to Covid-19 in May last year, faces a new challenge. Gupta’s family paid more than Rs 9 lakh for her father’s treatment, the majority of which was collected from friends and relatives. Some of the financial assistance they received was in the form of cash.

A social worker who helped the family hospitalize the patient last year recently told them about tax provisions that prohibit cash transactions between individuals in the form of loans above a certain limit. Now, the family of three brothers, employed in the unorganized sector, fears being harassed by the tax authorities.

A more recent case is that of Manish Jha from Noida for whom the pandemic came as an additional misfortune to his poor financial situation. When a family member tested positive for Covid-19 a few days ago and had to be hospitalized, Jha asked for financial help from his acquaintances. While most of the payments were transferred electronically, some contributions were received in cash. He too faces a similar risk to Gupta’s, but for now, his priority is to ensure the treatment of his sick relative.

Section 269SS of the Income Tax Act, 1961 prohibits the receipt of Rs 20,000 or more in cash as a loan or deposit by an individual from another individual. Only electronic transfer or payment by check is authorized for such transfers. In addition, any contravention is punishable according to the provisions contained in the Law.

The penalty is double the amount accepted in cash. “If a person contracts or accepts a loan or a deposit or a sum determined in violation of the provisions of Article 269SS, he is required to pay, as a penalty, an amount equal to the amount of the loan or the deposit or the determined sum so taken or accepted, ”says Section 271D of the Income Tax Act.

Chartered Accountant Ved Jain, who is also the former President of the Institute of Chartered Accountants of India, said: “Accepting a loan of Rs 20,000 or more is prohibited and the penalty is 100 % of the amount borrowed. This restriction needs to be relaxed in order to borrow for Covid treatment. ”

Another certification authority points out to BusinessToday.In that at a time when the government has already exempted cash transactions of Rs 1 lakh in hospitals, the provisions of sections 269SS and 271D must also be relaxed. Section 269 ST of the Income Tax Act, 1961 prohibits any cash transaction over Rs 2 lakh in a single day.

“The two have to go hand in hand. Releasing only 269ST and leaving out 269SS will not help families already struggling with the pandemic,” the HQ said on condition of anonymity.

So far, there have been no reported cases of income tax officers tracking down such individuals, including Jha and Gupta, under this provision. An income tax source said no claim or notice under the articles has been served on a person assessed under the provisions.

Having said that, there is a worry and worry about being on the wrong side of the law among such people. Meanwhile, after being pressured by the Delhi High Court earlier last week to consider easing the cash transaction cap from Rs 2 lakh to help Covid patients, the central government has issued a notice in the gazette facilitating cash payments of Rs 2 lakh to hospitals for treatment of Covid.

* Vishal Gupta and Manish Jha names have been changed upon request

Also read: Government eases Rs 2 lakh cash payment cap in COVID treatment after High Court boost

Read also: COVID-19 impact: LIC eases claims settlement requirements

Dorothy H. Lewis