You can repay your entire loan in cash, but here’s the catch

You heard it right. You can pay your entire loan to any housing finance company or even a non-banking finance company. But, the cash in each instalment should be less than Rs 2 lakh.

As per the new guidelines, cash payments/receipts of or over Rs 2 lakh are illegal and will attract penalty.

The finance ministry has stated prohibition of cash payment would only apply to repayment of a single loan instalment in cash and not to the aggregate amount.

Under Section 269ST, any person to receive amount of Rs 2 lakh and above in cash is prohibited.

A circular by the income tax department states receipt of repayment of loan by the Non-Banking Finance Companies (NBFC) and Housing Finance Companies (HFC) will fall under the purview of section 269ST clause (b) if the repayment of 'one' loan instalment is equal to or above Rs. 2 lakh.

All the instalments paid for a loan shall not be aggregated for the purposes of determining applicability of the provisions of section 269ST.