Circular No. 22/2017

Circular No. 22 of 2017

What this is

Circular No. 22/2017 was issued by the Central Board of Direct Taxes on 3 July 2017. Its subject is Circular No. 22 of 2017.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Clarifies how section 269ST applies to loan repayments received by non-banking financial companies and housing finance companies. Section 269ST, inserted by the Finance Act, 2017, prohibits receipt of two lakh rupees or more otherwise than by account payee cheque, account payee bank draft or electronic clearing through a bank account, and section 271DA imposes a penalty equal to the amount received in contravention. The Board holds that one instalment of loan repayment is a single transaction for clause (b) of section 269ST, and that the instalments paid on a loan are not to be aggregated in testing whether the section applies.

Why it was issued

Representations were received from non-banking financial companies and housing finance companies asking whether the section applies to one instalment of a loan repayment or to the whole of the repayment.

Who it reaches

Non-banking financial companies receiving cash instalments
Housing finance companies collecting loan repayments in cash
Borrowers repaying a loan in cash instalments
Assessing Officers considering penalty under section 271DA

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.269ST	s.2, s.186, s.189
s.271DA	s.451, s.470

The instrument, as the Board published it

The department publishes this one only as a PDF, so the words below were read out of that PDF by machine. That reading can carry its own mistakes — a misread number, a broken line. Check the signed document before you rely on a figure in it.

Circular No. 22 of 2017
F.No.370142/10/2017-TPL
Government of India
Ministry of Finance
Department of Revenue
(Central Board of Direct Taxes)
(TPL Division)
***
Dated 03rd July, 2017
Clarifications in respect of section 269ST of the Income-tax Act, 1961

With a view to promote digital economy and create a disincentive against cash economy, a new section 269ST has been inserted in the Income-tax Act, 1961(the Act) vide Finance Act, 2017. The said section inter-alia prohibits receipt of an amount of two lakh rupees or more by a person, in the circumstances specified therein, through modes other than by way of an account payee cheque or an account payee bank draft or use of electronic clearing system through a bank account. Penal provisions have also been introduced by way of a new section 271DA, which provides that if a person receives any amount in contravention to the provisions of section 269ST, it shall be liable to pay penalty of a sum equal to the amount of such receipt.

2. Subsequently, representations have been received from non-banking financial companies (NBFCs) and housing finance companies (HFCs) as to whether the provisions of section 269ST of the Act shall apply to one instalment of loan repayment or the whole amount of such repayment.

3. In this context, it is clarified that in respect of receipt in the nature of repayment of loan by NBFCs or HFCs, the receipt of one instalment of loan repayment in respect of a loan shall constitute a 'single transaction' as specified in clause (b) of section 269ST of the Act and all the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions section 269ST.

(Salil Mishra)
Director (Tax Policy & Legislation)

Copy to:-
1. PS to FM/ OSD to FM/ OSD to MoS(R).
2. PS to Secretary (Revenue).
3. The Chairperson, Members and all other officers in CBDT of the rank of Under Secretary and above.
4. All Pr. Chief Commissioners/ Pr. Director General of Income-tax – with a request to circulate amongst all officers in their regions/ charges.
5. Pr. DGIT (Systems)/ Pr. DGIT (Vigilance)/ Pr. DGIT (Admn.)/ Pr. DG (NADT)/ Pr. DGIT (L&R).
6. CIT (M&TP), CBDT.
7. Web manager for posting on the departmental website.

What to watch

The clarification is expressed for repayment received by a non-banking financial company or housing finance company; it does not say the same treatment applies to every lender.
The two lakh rupee test still applies to each instalment, so a single instalment at or above that figure taken in cash attracts the section.
The relief goes to aggregation under clause (b) only; clauses (a) and (c) of section 269ST are not addressed.
The penalty under section 271DA is equal to the whole amount received, so the exposure on a single bad instalment is severe.

Where you meet it

In a penalty proceeding under section 271DA on cash collections recorded in a finance company's books.

An example

Ours, not the Board’s: a worked case built from the rule the instrument sets, to show how it falls out.

A borrower repays a housing loan in twelve monthly instalments of Rs. 60,000 each in cash, Rs. 7,20,000 in the year. Because each instalment is a single transaction and is below two lakh rupees, section 269ST is not attracted, and the instalments are not aggregated to cross the threshold.

What it names

It mentions. Circular No. 22/2017

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 25/2022 — Clarification for the purposes of clause c of section 269ST of the income tax act 1961 in respect of dealership/distribu 30 December 2022
Notification No. 56/2021 [F. No. 225/58/2021-ITA.II] / SO 1803 — 2 the Gazette of INDIA : Extraordinary [Part Ii—sec. 3(ii)] 7 May 2021
Circular No. 27/2017 — Clarification on cash sale of agricultural produce by cultivators/agriculturists 3 November 2017
Notification No. 57 /2017, F.No.370142/10/2017-TPL]/ SO 2065(E) — To BE Published in the Gazette of INDIA, Extraordinary, Part II, section 3, Sub-section (ii)] 3 July 2017
Notification No.28/2017, F.No.370142/10/2017-TPL/S.O. 1057(E) — To BE Published in the Gazette of INDIA, Extraordinary, Part II, section 3, Sub-section (ii)] 5 April 2017

← Circular No. Modification of Circular No. 21/2015 dated 10.12.2015 · Circular No. 19/2017 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What it means in practice. This page is the instrument. For the question it answers, what the Board decided and what to do about it, see CBDT Circular 22/2017 — do cash instalments add up under s.269ST.