Chapter 18: Miscellaneous Provisions & Cash Restrictions

Section 185: Prohibition on Accepting Loans, Deposits and Specified Sums in Cash (Old Sec 269SS)

Section 185 mandates that no person shall take or accept from another person any loan or deposit or specified sum, otherwise than by an:

• (a) Account payee cheque; or
• (b) Account payee bank draft; or
• (c) Electronic clearing system (ECS) through a bank account; or
• (d) Any other prescribed electronic mode (Rule 133 / Tier-III CBDC).

Statutory Exceptions from Section 185

The prohibition under Section 185 does NOT apply to:

1. Government & Regulated Entities: Loan, deposit, or specified sum taken or accepted from or by:
   • The Central Government or any State Government;
   • Any banking company, post office savings bank, or co-operative bank;
   • Any corporation established by a Central, State, or Provincial Act;
   • Any Government company as defined in Section 2(45) of the Companies Act, 2013;
   • Any institution, association, or body notified by the Central Government.
2. Pure Agriculturists Exemption: Where the person taking or accepting such loan, deposit, or specified sum and the person from whom such loan, deposit, or specified sum is taken or accepted, both have only agricultural income and neither of them has any income chargeable to tax under the Act.

Section 186: Mode of Undertaking Transactions & Prescribed Banking Mode (Old Sec 269ST)

Section 186 enacts an overarching cash receipt ceiling of ₹2,00,000. It provides that no person shall receive an amount of ₹2,00,000 or more:

Receipt of such sums must be made solely through account payee cheque, account payee bank draft, electronic clearing system through a bank account, or other prescribed electronic modes.

Statutory Exceptions under Section 186

The prohibition under Section 186 does not apply to:

• (1) Any receipt by Government, banking company, post office savings bank, or co-operative bank;
• (2) Transactions of the nature referred to in Section 185 (loans/deposits/specified immovable property sums);
• (3) Receipts by business correspondents on behalf of banks per RBI guidelines (Notification No. 28/2017);
• (4) Receipts by White Label ATM Operators from retail outlets on behalf of banks (Notification No. 28/2017);
• (5) Cash withdrawals by any person from a bank, co-operative bank, or post office savings bank (Notification No. 28/2017);
• (6) Receipts from agents by issuers of prepaid payment instruments under RBI authorisation;
• (7) Receipts by credit card companies against bills raised in respect of credit cards;
• (8) Receipts which are exempt from total income under Section 10 (Notification No. 57/2017).

Crucial CBDT Clarifications on Section 186

Section 187: Mandatory Acceptance of Payments Through Prescribed Electronic Modes (Old Sec 269SU)

Section 187 mandates that every person carrying on business or profession whose total sales, turnover, or gross receipts in such business/profession exceeds ₹50 Crores during the immediately preceding tax year shall provide a facility for accepting payment through prescribed electronic modes, in addition to any other electronic facilities offered.

Prescribed Electronic Modes under Rule 133

Section 188: Mode of Repayment of Loans, Deposits & Specified Advances (Old Sec 269T)

Section 188 provides that no branch of a banking company or a co-operative bank, company, co-operative society, firm, or other person shall repay any loan or deposit made with it or any specified advance received by it, otherwise than through an:

• (a) Account payee cheque;
• (b) Account payee bank draft drawn in the name of the payee; or
• (c) Electronic clearing system (ECS) through a bank account or prescribed electronic modes.

Statutory Exceptions under Section 188

1. Direct Bank Account Credit: Where repayment is made by a banking company or co-operative bank by directly crediting the loan/deposit amount to the savings or current account of the depositor with such branch.
2. Government & Institutional Payees: Repayment of loan, deposit, or specified advance taken from Government, banks, post office savings banks, statutory corporations, or Government companies.

Section 499: Certain Transfers to Defraud Revenue to be Deemed Void (Old Sec 281)

Section 499 acts as an statutory safeguard against non-realisation of tax revenue caused by fraudulent transferring of assets by a defaulting assessee.

De Minimis Monetary Thresholds

The provisions of Section 499 apply only to cases where:

• (a) The amount of tax or other sum of money payable or likely to be payable exceeds ₹5,000; and
• (b) The assets which are charged or transferred by the assessee exceed ₹10,000 in value.

Statutory Safe Harbours (When Transfer is NOT Void)

A transfer or charge made by the assessee shall NOT be void if it is made:

Section 500: Provisional Attachment to Protect the Interests of the Revenue (Old Sec 281B)

Section 500 empowers the Assessing Officer to provisionally attach any property belonging to the assessee during the pendency of assessment or penalty proceedings, subject to strict procedural checks.

Section 501: Permissible Modes of Service of Notice (Old Sec 282)

Section 501 provides that service of any notice, summons, requisition, order, or communication under the Act may be effected by delivering or transmitting a copy thereof to the person named therein:

Section 502: Authentication of Notices & Mandatory DIN (Old Sec 282A)

Section 502 read with Rule 233 mandates that any notice, summons, or document issued by an income-tax authority must be signed and issued in paper form or communicated in electronic form in accordance with prescribed procedure.

Sections 503 & 504: Service of Notice on Disrupted HUF, Dissolved Firms & Discontinued Business

Section 522: Technical Defects Not to Invalidate Returns, Notices & Assessments (Old Sec 292B)

Section 522 provides that no return of income, assessment order, notice, summons, or other proceeding shall be invalid or deemed invalid merely by reason of any mistake, defect, or omission, if such return, order, notice, or proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.

Section 523: Notice Deemed Valid where Assessee Participated in Proceedings (Old Sec 292BB)

Section 523 creates a statutory estoppel. Where an assessee has appeared in any proceeding or co-operated in any inquiry relating to assessment or reassessment, it shall be deemed that any statutory notice required to be served was duly served in time in accordance with the Act.

Section 507: Statements by Film Producers & Persons in Specified Activities (Old Sec 285B)

Section 507 read with Rule 236 requires every producer of a cinematograph film or person engaged in any specified activity (or both) during the whole or any part of any tax year to furnish a statement in Form No. 164.

Section 508: Statement of Financial Transactions (SFT) or Reportable Account (Old Sec 285BA)

Section 508 imposes a mandatory obligation on designated reporting entities to register, maintain records, and furnish a Statement of Financial Transaction (SFT) or Reportable Account in Form No. 165 on or before 31st May following the relevant financial year.

Statutory Compliance Lifecycle under Section 508

Comprehensive SFT Reporting Matrix [Rule 237 Table]

Information for Pre-filling Return of Income [Rule 237(6)]

To facilitate seamless automated pre-filling of returns, the following information must be furnished on an ongoing basis:

• Capital Gains on Listed Securities / Mutual Funds: All transactions reported by Stock Exchanges, Depositories, Clearing Corporations, and RTAs.
• Dividend Income: All dividend payments reported by companies.
• Interest Income: All accounts where interest exceeds zero in a financial year (excluding PM Jan Dhan Accounts) reported by banks, post offices, and NBFCs.

Fees & Penalties for SFT Defaults [Sections 427(3), 454, 455]

Section 509: Reporting Transactions in Crypto-Assets (Old Sec 285BAA)

Section 509 read with Rule 243 mandates crypto-asset service providers and exchanges to furnish an annual statement of transactions in crypto-assets on or before 31st May following the relevant calendar year to the Director / Joint Director of Income-tax (Intelligence and Criminal Investigation).

Section 510: Annual Information Statement (AIS) & Taxpayer Information Summary (Old Sec 285BB)

Section 510 read with Rule 245 provides the statutory foundation for the Annual Information Statement (AIS). The Director General of Income-tax (Systems) is required to upload in the registered electronic portal account of the assessee an annual statement in Form No. 168 within 90 days from the end of the month in which information is received.

Statutory Components of AIS [Rule 245 Table]

In addition, AIS captures pending assessment/penalty proceedings (Category 5), completed proceedings (Category 6), and data received from foreign jurisdictions under bilateral exchange of information agreements (Section 159 / DTAAs).

Section 512: Publication of Names of Certain Tax Defaulters (Old Sec 287)

Where the Central Government is of the opinion that it is necessary or expedient in the public interest, it may publish the names of any assessees and particulars relating to any proceedings or prosecutions in the Official Gazette or media.

Sections 513 & 514: Appearance by Registered Valuers & Registration (Old Sec 287A)

Under Section 513, an assessee entitled or required to attend before any income-tax authority or the Appellate Tribunal in matters relating to the valuation of any asset may attend through a Registered Valuer.

Section 515: Appearance by Authorised Representative (AR) (Old Sec 288)

An assessee required or entitled to attend before any Income-tax Authority or the Appellate Tribunal in connection with any proceeding may appear through an Authorised Representative (AR) authorised in writing, except when personal appearance is required for examination on oath under Section 246.

Persons Qualified to Act as Authorised Representative

Disqualifications of an Accountant to Act as AR

To ensure professional independence, the following persons cannot act as an Accountant for representation:

General Disqualifications from Being an Authorised Representative [Section 515(4)]

Misconduct & Disciplinary Proceedings [Section 515(5)-(6)]

Where an accountant (CA) or advocate is found guilty of professional misconduct by their regulatory institute (ICAI or Bar Council), any disciplinary order cancelling their right to practice automatically extinguishes their right to appear before income-tax authorities.
For other representatives, the prescribed authority may pass an order of disqualification after giving an opportunity of being heard. The representative has a right of appeal to the CBDT within 1 month, and the disqualification order takes effect only after 1 month or disposal of appeal.

Sections 516, 517 & 518: Rounding Off, Statutory Receipts & Indemnity

Sections 526, 528, 529 & 530: General Administrative Powers & Legal Shield

Sections 532, 533 & 534: Faceless Schemes, CBDT Rule-Making & Parliamentary Laying

Section 532 empowers the Central Government to notify faceless and digital tax schemes to eliminate physical interface and optimise efficiency through economies of scale.

Section 535: Power to Remove Statutory Difficulties (Old Sec 298)

If any difficulty arises in giving effect to the provisions of the Income-tax Act, 2025, the Central Government may, by general or special order, make provisions or adaptations not inconsistent with the Act.

Section 536: Repeal of the 1961 Act & Statutory Savings Provisions (Old Sec 297)

Section 536(1) formally repeals the Income-tax Act, 1961. To guarantee a seamless statutory transition without legal vacuum or tax leakage, Section 536(2) read with Section 6 of the General Clauses Act, 1897 enacts comprehensive savings: