Section 269SS of the Income-tax Act provides that no person shall take or accept any loan or deposit from any other person (referred to as depositor) except by an account payee cheque or by an account payee bank draft, in the following cases:
(i) where the amount of such loan or deposit or the aggregate amount of such loan or deposit taken or accepted from the depositor is Rs. 20,000 or more;
(ii) where on the date of taking or accepting such loan or deposit, any earlier loan or deposit taken or accepted from the depositor and remaining unpaid on the date is Rs. 20,000 or more;
(iii) where the amount of such loan or deposit taken together with the aggregate amount remaining unpaid on the date on which loan or deposit is proposed to be taken or accepted is Rs. 20,000 or more.
The above provision will, however, not apply to any loan or deposit taken or accepted from, or any loan or deposit taken or accepted by:
(b) any banking company, post office savings bank or co-operative bank;
(c) any corporation established by a central, state or Provincial Act:
(d) any Government company as defined in section 617 of the Companies Act, 1956:
(e) such other institution, association or body or class of institutions, associations or bodies which the Central Government may notify in this behalf in the Official Gazette:
(f) lender or borrower, in a case where the lender and borrower have agriculture income and neither of them has any income chargeable to tax under the Income Tax Act.
For non compliance with the provisions of section 269SS, penalty equal to the amount of the loan or deposit taken is leviable u/s 271D.
Repayment of loan or deposit together with or without interest or interest alone exceeding Rs. 20,000 are to be made by an account payee cheque or by an account payee bank draft [ Section 269T ]. This provision will be applicable to all persons such as invidual, HUF, AOP, Company, co-operative society, firm, etc. Provision of Section 269T will not apply to repayment of any loan or deposit taken or accepted from persons referred to in (a) to (e) above [2nd proviso to Section 269T]. For non-compliance with the provisions of Section 269T, a penalty equal to the amount of loan or deposit repaid will levied u/s 271E.