Sub-section (1) prohibits any person from receiving an amount of Rs. 200000 or more except through an account payee cheque, an account payee bank draft, an electronic clearing system through a bank account, or any other electronic mode as may be prescribed. The prohibition bites on three separate measures, each independently: clause (a), the amount received in aggregate from a person in a day; clause (b), the amount received in respect of a single transaction; and clause (c), the amount received in respect of transactions relating to one event or occasion from a person.
Sub-section (2) exempts three categories: clause (a), any receipt by Government, any banking company, post office savings bank or co-operative bank; clause (b), transactions of the nature referred to in section 185; and clause (c), such other persons or class of persons or receipts as may be notified by the Central Government.
Why it is there
Large cash receipts leave no trail, and the section attacks them at the point of receipt rather than at the point of payment, so the recipient carries the duty. The three alternative measures exist because a single large receipt can be broken into pieces — split across a day, across the parts of one transaction, or across the several payments that make up one event or occasion — and each of those splits is caught by its own limb.
Who it applies to
Every person receiving an amount of Rs. 200000 or more, in any of the three ways described
Government, a banking company, a post office savings bank and a co-operative bank, which are outside the prohibition
A person to a transaction of the nature referred to in section 185, which is outside the prohibition
Persons, classes of persons or receipts notified by the Central Government as exempt
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Threshold for the prohibition
Rs. 200000 or more
Measured in aggregate from a person in a day
Sub-section (1)(a)
Threshold for the prohibition
Rs. 200000 or more
Measured in respect of a single transaction
Sub-section (1)(b)
Threshold for the prohibition
Rs. 200000 or more
Measured in respect of transactions relating to one event or occasion from a person
Sub-section (1)(c)
What this means in practice
The figure is "Rs. 200000 or more", so a receipt of exactly two lakh rupees is caught. The three limbs are alternatives and any one of them is enough — receipts each below two lakh rupees can still breach clause (a) if they aggregate to two lakh or more from one person in a day, or clause (c) if they relate to one event or occasion. The duty is on the receiver, and only the four permitted modes satisfy it: a cheque or bank draft that is not account payee is not one of them. The exemptions in sub-section (2) are institutional or notified — there is no general exemption for a genuine or explained transaction.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
A firm sells goods to a customer for five lakh rupees and takes payment in three instalments of one lakh seventy thousand rupees each, on three different days, in cash. No single day's receipt reaches two lakh rupees, so clause (a) is not breached, but the whole five lakh relates to a single transaction and clause (b) is breached the moment the cumulative cash received against that transaction reaches two lakh rupees. The same result would follow under clause (c) if the payments related to one event or occasion. Had the firm taken the same amounts by account payee cheque or through an electronic clearing system, sub-section (1) would not be attracted at all.
Where you meet this section
This is a rule you meet at the counter rather than in a form: it governs how a business, a professional or an institution may accept a payment of two lakh rupees or more. It surfaces in a proceeding when the Department examines cash receipts recorded in books or found on a search, and asks the recipient to show that each qualifying receipt came through one of the four permitted modes.
The words themselves
No person shall receive an amount of Rs. 200000 or more—
Section 186(1), Income-tax Act, 2025.
in respect of transactions relating to one event or occasion from a person
Section 186(1)(c), Income-tax Act, 2025.
any receipt by Government, any banking company, post office savings bank or co-operative bank
Section 186(2)(a), Income-tax Act, 2025.
What people get wrong
Reading the threshold as an amount that must be exceeded. Sub-section (1) applies to a receipt of "Rs. 200000 or more", so exactly two lakh rupees is caught.
Testing only the daily aggregate. Clauses (b) and (c) apply independently to a single transaction and to transactions relating to one event or occasion, so splitting a payment across days does not help.
Treating the section as a rule about payments. Sub-section (1) prohibits receiving, and the duty falls on the person who receives.
Treating any cheque or draft as compliant. Only an account payee cheque or account payee bank draft qualifies, along with electronic clearing system through a bank account or another prescribed electronic mode.
Assuming a co-operative society is exempt. Clause (2)(a) exempts Government, a banking company, a post office savings bank and a co-operative bank; anything wider depends on a notification under clause (2)(c).
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
Rules of the Income-tax Rules, 2026 that work section 186. Where the rule’s own heading names the section we say so; the rest are marked on reading the rule, which is our derivation and not the department’s. A rule that serves the section silently and that we have missed will not appear here.
Rule 48 — Other electronic modes of payment — on reading the rule
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular No. 25/2022 — Clarification for the purposes of clause c of section 269ST of the income tax act 1961 in respect of dealership/distributorship co 2022-12-30
Circular No. 27/2017 — Clarification on cash sale of agricultural produce by cultivators/agriculturists 2017-11-03
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 186. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
RBANMS Educational Institution v B. GunashekarSupreme CourtHelps departmenttagged s.269ST The section 269ST penalty falls on the person who receives the cash. If I am the buyer paying cash for property, am I exposed at all?
JCIT v Ganesh AgarwalHigh CourtCuts both waystagged s.269ST The Assessing Officer referred my section 269ST case to the Joint Commissioner months ago and the show cause notice has only just come. When does the…
Delta Farm Services v ITOITATHelps taxpayertagged s.269ST I received cash of more than Rs. 2 lakh from farmer-buyers against genuine, fully accounted sales in the first year of section 269ST. Can a section…
CBDT Circular 22/2017CBDTHelps taxpayertagged s.269ST We take loan repayments in cash instalments. Do the instalments add up against the two lakh limit?
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.
