Income tax Provisions on Acceptance of Loan / Deposit

Applicability:

1. Company including LLP ( Limited Liability Partnership) ,
2.  HUF
3.  Individual including Salaried Person
4.  Partnership firm
5. An Association of persons or a body of Individuals, whether incorporated or not
6. Local authority.

Non - Applicability:

Loan or Deposit taken/accepted by or from:

1. Government

2. Any Banking Company, post office savings bank or co-operative bank

3. Any Corporation established by a Central, State or Provincial Act

4. Government Company

5. Both Lender and borrower have only agricultural income and neither of them has any income chargeable to tax under this Act.
 

Threshold limit: 20,000

Provisions: person can accept loan / deposit only by an account payee cheque or account payee bank draft if loan /deposit amount either single or in aggregate exceeds threshold limit i.e. 20,000.  Earlier Loan & Deposit remaining unpaid shall also be considered in deciding the limit of 20,000.
 

271D: Penalty for failure to comply with the provisions of section 269SS (1): A sum equal to the amount of the loan or deposit so taken or accepted shall be imposed by the Joint Commissioner.

Disclosure Requirement: For Business people & entities, Chartered Accountant has to report about 269SS transactions in his 44AB (Tax) audit report every year in Form 3CD. For Salaried person, these transactions will be checked only during Scrutiny.

Written by CA Soniya Agarwal
Active Blog at soniya0454.wordpress.com