Clause 451 vs Section 271DA What’s Changing in Cash Transaction Penalties?
Clause 451 of the Income Tax Bill, 2025 proposes a major revamp of penalty provisions for violations of Section 269ST — the rule that bars cash receipts of ₹2 lakh or more. It replaces the existing Section 271DA with a more precise, procedural framework.
If you or your clients deal in cash, this is a must-read.
What Is Section 269ST?
Before we jump into Clause 451, let’s revisit what Section 269ST says:
You cannot receive ₹2 lakh or more in cash:
- From a single person in one day, or
- For a single transaction, or
- For transactions relating to one event or occasion
Exceptions:
- Government
- Banks, Post Offices, Co-op Banks
- Other notified persons
Violation attracts a 100% penalty under Section 271DA, i.e., the receiver pays a fine equal to the amount received.
What Does Clause 451 of the Income Tax Bill, 2025 Propose?
Clause 451 proposes to omit Section 271DA and introduce a new penalty regime under Section 271FAB. Here’s how it changes the game:
| Feature | Section 271DA (Current) | Clause 451 / Section 271FAB (Proposed) |
|---|---|---|
| Applicable Law | Income-tax Act, 1961 | Income-tax Bill, 2025 |
| Penalty Authority | Joint Commissioner | Assessing Officer (AO) |
| Penalty Amount | Equal to the amount received in cash | Equal to the amount received in cash |
| Opportunity of Hearing | Yes, but vaguely defined | Explicit opportunity to be heard |
| Effective From | Existing law | To be notified once the Bill is enacted |
Key Takeaways from Clause 451
- The quantum of penalty remains the same: 100% of the cash received.
- But procedural clarity improves: AO is directly empowered, and hearing rights are codified.
- This improves legal certainty and reduces discretionary misuse.
- Once the Income Tax Bill 2025 is enacted, Section 271DA will cease to exist.
Legal Basis & Source
- Income-tax Bill, 2025: Download PDF from incometaxindia.gov.in
- Clause 451 corresponds to Chapter XXV (Offences & Penalties) of the new Bill
- Current rule under Section 269ST and Section 271DA of the Income-tax Act, 1961
Why Is This Important for Taxpayers and Businesses?
- Many small businesses, especially in Tier 2 and 3 cities, still deal in cash.
- Weddings, real estate, and local trade are high-risk sectors.
- With faceless assessments and TMS (Taxpayer Monitoring System) now in place, cash transactions trigger scrutiny more than ever.
Efiletax Tip:
Banks report cash receipts over ₹2 lakh (per day) under SFT to the ITD. Even if you’re not audited, these reports increase the risk of automated penalty notices.
How to Stay Compliant
- Avoid receiving ₹2 lakh or more in cash — split payments are also monitored.
- Use cheques, bank transfers, UPI for large transactions.
- Maintain invoice-level audit trails.
- If you’ve violated the provision, consult a tax professional immediately — response timing matters.
FAQs
Q1: Is Clause 451 already in force?
No, it’s part of the draft Income-tax Bill, 2025 and will apply once notified after enactment.
Q2: Who will impose the penalty under the new rule?
The Assessing Officer will issue the notice, not the Joint Commissioner as per the old rule.
Q3: Can penalty under Clause 451 be challenged?
Yes, standard appellate remedies will apply — starting with CIT(A).
Q4: Does digital cash (wallets, UPI) count as ‘cash’?
No. Cash refers only to physical currency. UPI, NEFT, etc. are digital modes and allowed.
Summary
Clause 451 of the Income Tax Bill 2025 replaces Section 271DA with a new penalty provision for cash receipt violations under Section 269ST, empowering the Assessing Officer and ensuring fair hearing rights for taxpayers before penalty is imposed.
Final Word
The government is not relaxing the ₹2 lakh cash limit — it’s tightening enforcement. Clause 451 aims to bring more transparency and procedural safeguards, but the penalty sting remains.
Don’t wait for a notice — use digital transactions and stay compliant.
👉 Need help with Section 269ST compliance or a cash-related penalty case?
Talk to Efiletax experts today – we handle it end-to-end.