Section 185
Section 185: mode of taking or accepting certain loans, deposits and specified sums
Section 185 bans taking or accepting loans, deposits, or a "specified sum" (typically an advance towards transfer of immovable property) in cash once the amount, or the aggregate with any earlier unpaid loan/deposit/specified sum from the same person, reaches ₹20,000 - it must instead go through an account payee cheque, account payee bank draft, ECS, or another prescribed electronic mode.
The core restriction
No person shall take or accept from another person any loan or deposit or specified sum, except through an account payee cheque, an account payee bank draft, electronic clearing system (ECS) through a bank account, or any other prescribed electronic mode, if:
- the amount or aggregate amount of such loan, deposit or specified sum; or
- the amount or aggregate amount of any previously taken/accepted loan, deposit or specified sum from that same person which remains unpaid (whether due for repayment or not), as on the date of taking/accepting the new amount; or
- the aggregate of both of the above, is ₹20,000 or more.
Who is exempt from this restriction
The restriction does not apply to loans, deposits or specified sums taken or accepted from or by:
- the 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 under Section 2(45) of the Companies Act, 2013;
- any institution, association, or body (or class of them) notified by the Central Government.
Agricultural income exception
The restriction also does not apply to a loan, deposit or specified sum where both the person taking/accepting it and the person from whom it is taken/accepted have agricultural income and neither has any income chargeable to tax under the Act.
Higher ₹2,00,000 threshold for agricultural credit societies
The ₹20,000 threshold is replaced by ₹2,00,000 where a deposit is accepted by a primary agricultural credit society or a primary co-operative agricultural and rural development bank from its member, or a loan is taken from such a society/bank by its member.
Definition
"Loan or deposit" means loan or deposit of money.
Frequently asked questions
What is the cash limit for taking a loan or deposit under Section 185?
₹20,000 - once the amount, or the aggregate with any previously taken and still-unpaid loan/deposit/specified sum from the same person, reaches ₹20,000 or more, it must be taken through an account payee cheque, account payee bank draft, ECS, or another prescribed electronic mode, not cash.
Does the ₹20,000 limit apply to loans between two agriculturists?
No - Section 185(3) exempts loans, deposits or specified sums where both the person taking/accepting and the person giving it have agricultural income and neither has any income chargeable to tax under the Act.
Is there a higher threshold for primary agricultural credit societies?
Yes - the limit is ₹2,00,000 instead of ₹20,000 for deposits accepted by, or loans taken from, a primary agricultural credit society or primary co-operative agricultural and rural development bank, by/from its own members.
What is a 'specified sum' under this chapter?
As defined in Section 189(c), it is any sum of money receivable, whether as advance or otherwise, in relation to the transfer of an immovable property, whether or not the transfer actually takes place.
Related sections
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