Granting further relief in view of the severe Covid pandemic, provisions of section 269ST of Income-tax Act, 1961 relaxed by the Central Government. It now allows Hospitals/Medical facilities etc. providing Covid treatment to patients to receive cash payments of Rs. 2 lakh or more. This relaxation is granted for the period from 01.04.2021 to 31.05.2021, and the hospital,etc. is required to obtain PAN or AADHAAR of the patient and the payee payer. A Notification No. 56/2021 in S.O. 1803(E) dated 07.05.2021 is issued in this regard by the CBDT.
● Hospitals/medical facilities providing COVID treatment to patients can now receive cash payments even higher than Rs. 2 lakh
● Cash Limit of Rs. 2 Lakh in section 269ST has been relaxed, for the period from 01.04.2021 to 31.05.2021
● PAN or AADHAAR of patient & payee payer to be obtained
Since the second wave of COVID pandemic ushered, it was demanded that the government should relax the conditions of section 269ST since many were finding it difficult to pay the hospital bills in cash where the bill goes beyond Rs. 2 Lakh. Hospitals were reluctant to receive the payment in cash in contravention to section 269ST. Hence, in order to provide the relief, the government has eased the provisions of section 269ST in order to enable the hospitals etc. to receive the payment in cash in excess of Rs. 2 Lakh for treatment of COVID patients.
Analyzing the Notification relaxing the provisions of section 269ST for COVID treatment
The notification relaxing the provisions of section 269ST for COVID treatment is analyzed as below:
1. The relaxation from the applicability of section 269ST is given only to Hospitals, Dispensaries, Nursing Homes, Covid Care Centres or similar other medical facilities.
2. Such Hospitals, Dispensaries, Nursing Homes, Covid Care Centres or similar other medical facilities are receiving cash payment in excess of Rs. 2 Lakh only for the treatment of COVID patients. Thus, treatment of any other disease is not covered in the exclusion. In those cases, even the hospitals etc., cannot receive payment in cash in excess of Rs. 2 lakh. This relaxation is given only for the treatment of COVID patients.
3. The hospital bill may be paid by the patients himself or by any other person say, his relative, friend, etc. In this case, it is stated that in order to avail the relaxation and receipt of cash of over Rs. 2 Lakh, the hospital must obtain the PAN or Aadhaar of the patient as well as the PAN or Aadhaar of the person making the payment to the hospital. Further, the relationship between the patient and the payer of the bill shall also be obtained.
4. One should note that there is no exclusion given in the reporting in the Statement of Financial Transaction (SFT) under Section 285BA read with Rule 114E in Form No. 61A. Hospitals shall have to report details of cash received in SFT if hospitals are subject to Audit u/s 44AB. Further, the same may require disclosure in Form 3CD of the hospitals, etc.
Provisions of section 269ST and Penalty for its Contravention
Section 269ST provides that no person shall receive an amount of Rs. 2 Lakh or more,—
(a) in aggregate from a person in a day;
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person,
otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account.
Section 269ST was inserted by the Finance Act, 2017 w.e.f 1.4.2017 in order to achieve the mission of the Government to move towards a less-cash economy to reduce the generation and circulation of black money.
The said restriction of cash payment limit of Rs. 2 Lakh shall not apply to Government, any banking company, post office savings bank or co-operative bank. It further provides that the Central Government shall have the power to notify such other persons or class of persons or receipts on whom the restriction on cash transactions as per section 269ST shall not apply.
Any sum received in contravention of the provisions of section 269ST shall attract a penalty under section 271DA and the amount of penalty is a sum equal to the amount of such receipt.
Read the full text of Notification No. 56/2021 dated 7-5-2021 on relaxation to hospitals etc. from Section 269ST for COVID treatment
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 7th May, 2021
(INCOME-TAX)
S.O. 1803(E).—The Central Government, in exercise of powers conferred by clause (iii) of Proviso to Section 269ST of the Income-tax Act, 1961, hereby specifies Hospitals, Dispensaries, Nursing Homes, Covid Care Centres or similar other medical facilities providing Covid treatment to patients for the purpose of Section 269ST of the Income-tax Act,1961 for payment received in cash during 01.04.2021 to 31.05.2021, on obtaining the PAN or AADHAAR of the patient and the payee and the relationship between the patient and the payee by such Hospitals, Dispensaries, Nursing Homes, Covid Care Centres or similar other medical facilities.
[Notification No. 56/2021/F. No. 225/58/2021-ITA.II]
PRAJNA PARAMITA, Director
Note: It seems that, in the Notification, due to some typo error, “Payee” has been mentioned instead of “Payer” for obtaining PAN/AADHAR in the sentence “on obtaining the PAN or AADHAAR of the patient and the payee and the relationship between the patient and the payee”. Issue of a corrigendum in this regard is highly desirable at the earliest to clarify the matter.
Update:
CBDT vide a Corrigendum Notification No. 59/2021 dated 10th May 2021 corrected the error in the Original Notification and the word ‘payee’ is rectified with ‘payer’. The Board has issued the corrigendum to correct the word "payee" with "payer" in the context of furnishing PAN or AADHAAR and the relationship with the patient. The Corrigendum reads as follows-
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
CORRIGENDUM
New Delhi, the 10th May, 2021
(INCOME-TAX)
S.O. 1839(E).—In the Notification of the Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, published on 7th May, 2021, vide S.O. 1803(E), in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii), “payee” is to be read as “payer”.
[Notification No. 59/2021/ F. No. 225/58/2021-ITA.-II]
PRAJNA PARAMITA, Director
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