Cash in Land Deals: Sections 269SS, 269ST and 271D/271E Explained (2026)

At a glance

The money limits did not change when the new Act took effect; the section numbers did.

Old and new section numbers

The Income-tax Act, 2025 received Presidential assent on 21 August 2025 and came into force on 1 April 2026, replacing the Income-tax Act, 1961, according to the Central Board of Direct Taxes (CBDT). The Income-tax Rules, 2026 were notified on 20 March 2026. The Income Tax Department's section pages for the 2025 Act show:

• Section 185: mode of taking or accepting certain loans, deposits and specified sum (old 269SS).
• Section 186: the Rs 2 lakh cash receipt rule (old 269ST).
• Section 188: repayment of loans, deposits and specified advances (old 269T).
• Sections 450, 451 and 453: penalties for breaking sections 185, 186 and 188 (old 271D, 271DA and 271E).

Court orders and circulars still use the 1961 numbers, and a deal done before 1 April 2026 may still be examined under the 1961 Act. We could not confirm the transitional wording for a given earlier year; check with a chartered accountant if a notice refers to one.

The Rs 20,000 rule for land advances

The Finance Act, 2015 substituted section 269SS with effect from 1 June 2015 so that it covers a "specified sum" as well as loans and deposits. This is money receivable, as an advance or otherwise, in relation to the transfer of immovable property (the Act's words), whether or not the transfer takes place. A token amount, often called bayana (बयाना), or earnest money on a land deal is caught.

The rule applies when the sum being accepted, the unpaid earlier sums from the same person, or the two together reach Rs 20,000 or more. Such sums must come by account payee cheque, account payee bank draft, electronic clearing through a bank account, or a prescribed electronic mode. Rule 6ABBA of the 1961 Rules listed credit card, debit card, net banking, IMPS, UPI, RTGS, NEFT and BHIM Aadhaar Pay. We could not confirm the matching rule in the Income-tax Rules, 2026.

The rule does not apply to money taken from or by the Government, banks, post office savings banks, co-operative banks, statutory corporations, Government companies or notified institutions. One exception matters in farm deals: it does not apply where both parties have agricultural income and neither has income chargeable to tax. Whether a buyer and seller fit this depends on their full tax position; confirm it with a tax adviser.

The Rs 2 lakh receipt rule

Section 269ST, inserted by the Finance Act, 2017 and now section 186, applies to anyone receiving money. No one may receive Rs 2 lakh or more other than by account payee cheque, account payee draft, electronic clearing or a prescribed electronic mode, where the amount is received from one person in a day, in respect of a single transaction, or for transactions relating to one event or occasion from a person.

Receipts by the Government and banks are excluded, as are transactions covered by section 269SS (now 185) and any receipts the Central Government notifies. CBDT Circular No. 22/2017 of 3 July 2017 clarified that each instalment of a loan repaid to a finance company is a single transaction; it did not deal with land sales.

For land, the overlap is the balance price paid at registration. Tribunals have differed on whether this is a "specified sum" under section 269SS or a receipt under section 269ST. Either way, cash above the threshold exposes the receiver to a penalty equal to the amount.

Refunds and penalties

When a deal falls through, section 269T (now 188) applies to the person repaying. A "specified advance" of Rs 20,000 or more connected with a land transfer must be refunded by account payee cheque, draft, electronic clearing or a prescribed electronic mode. This also took effect from 1 June 2015.

• Section 271D, now 450: penalty equal to the loan, deposit or specified sum accepted in breach of the Rs 20,000 rule.
• Section 271DA, now 451: penalty equal to the sum received in breach of the Rs 2 lakh rule. The 1961 text spared a person who proved good and sufficient reasons.
• Section 271E, now 453: penalty equal to the amount repaid in breach of the repayment rule.

Under the 1961 Act, a proviso moved these penalties from the Joint Commissioner to the Assessing Officer for penalties imposed on or after 1 April 2025, and the 2025 Act names the Assessing Officer. Section 273B of the 1961 Act let a person avoid the 271D and 271E penalty by proving reasonable cause; we could not confirm its 2025 Act equivalent.

The penalty falls on the receiver or the repayer. A buyer who pays cash is not off the hook: the buyer must still explain the source of the money, and cash leaves a weak record of payment.

Stamp duty value and payment mode

Under section 50C of the 1961 Act, if the sale price of land is lower than the stamp valuation authority's value, the stamp value is treated as the seller's sale consideration. Where the agreement and registration dates differ, the stamp value on the agreement date may be used only if some of the price was received on or before that date by a non-cash mode. A cash token does not qualify. A tolerance band also applies; check the percentage for your year. We have not mapped section 50C to the 2025 Act here.

For duty rates see stamp duty and registration charges by state, and for tax deducted by the buyer on certain purchases see TDS under section 194-IA.

What to check before you pay or accept money

• Pay the token and balance from your own bank account to the recorded owner's account, and record each payment's mode and reference in the agreement and the sale deed.
• A seller or agent asking for a large cash token "to hold the deal" is asking for a transaction that can attract a penalty and weakens your evidence.
• A deed value far below the real price, with the gap in cash, creates tax exposure for both sides.
• If a deal is cancelled, insist on a bank refund to the original account.
• Confirm the seller's title before paying anything; see our land due diligence checklist and land registration process.
• If cash above these limits has already changed hands, speak to a chartered accountant or tax advocate. This guide explains the rules; it does not assess any individual case.

Frequently Asked Questions

Sources

• Income Tax Department: Income-tax Act, 2025 comes into force from 1st April 2026
• CBDT: Press release, 1 April 2026
• Income Tax Department: Section 269SS, Income-tax Act, 1961
• Income Tax Department: Finance Act, 2015, substitution of section 269SS
• Income Tax Department: Section 271DA, Income-tax Act, 1961
• Income Tax Department: Section 271E, Income-tax Act, 1961
• Income Tax Department: Section 450, Income-tax Act, 2025
• Income Tax Department: Section 451, Income-tax Act, 2025
• Income Tax Department: Section 453, Income-tax Act, 2025
• Income Tax Department: Rule 6ABBA
• Income Tax Department: Section 50C, Income-tax Act, 1961