Section 186 of the Income-tax Act, 2025 prohibits receiving ₹2,00,000 or more otherwise than through banking channels, tested three ways: in aggregate from a person in a day, in respect of a single transaction, or for transactions relating to one event or occasion.
What section 186 does
Section 186 is the general cash receipt cap — the successor to section 269ST of the Income-tax Act, 1961. Unlike section 185, it is not confined to loans and deposits; it applies to any receipt.
The ₹2,00,000 threshold is tested on three independent bases, and breaching any one is enough: (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.
The third limb is the one businesses most often miss. Splitting a wedding catering bill, a construction contract or a series of related sales across several days does not help, because they relate to one event or occasion.
The Income-tax Act, 2025 takes effect from 1 April 2026 and applies from tax year 2026-27. The Income-tax Act, 1961 continues to govern every year up to 31 March 2026, including assessments, appeals and penalties for those years, because of the repeal and savings provision in section 536. Figures quoted here are the amounts written into the Act as enacted (with the Gazette corrigenda of 3 September 2025); the annual Finance Act can change rates and thresholds.
Old Act and new Act, side by side
The table below shows what the Income-tax Act, 1961 did and where the same ground is covered in the Income-tax Act, 2025.
| Income-tax Act, 1961 | What it did | Income-tax Act, 2025 |
|---|---|---|
| 269ST(a) | ₹2,00,000 in aggregate from a person in a day | 186(1)(a) |
| 269ST(b) | Single transaction | 186(1)(b) |
| 269ST(c) | Transactions relating to one event or occasion | 186(1)(c) |
| 269ST, proviso | Government, banks and notified exclusions | 186(2) |
| 271DA | Penalty equal to the amount received | 451 |
| 269SS | Loans and deposits | 185 |
Section 186 sub-section by sub-section
Read this alongside the bare text — each heading below is a sub-section of the section as enacted.
Sub-section (1) — the three tests
No person shall receive an amount of ₹2,00,000 or more — (a) in aggregate from a person in a day; or (b) in respect of a single transaction; or (c) in respect of transactions relating to one event or occasion from a person — except through an account payee cheque, account payee bank draft, electronic clearing system through a bank account, or other prescribed electronic mode.
Limb (a) — the day test
All cash received from one person in one day is aggregated, even across unrelated transactions. Two separate sales of ₹1,20,000 and ₹1,10,000 to the same customer on the same day breach the section.
Limb (b) — the single transaction test
A single transaction of ₹2,00,000 or more cannot be received in cash even if split across several days. An invoice of ₹6,00,000 settled in three cash instalments of ₹2,00,000 on different dates still breaches limb (b).
Limb (c) — the event or occasion test
Transactions relating to one event or occasion from a person are aggregated. A wedding, a single construction project, or a package of related services is one occasion, whatever the number of invoices or dates.
Sub-section (2) — the exclusions
The section does not apply to (a) any receipt by the Government, a banking company, a post office savings bank or a co-operative bank; (b) transactions of the nature referred to in section 185 — loans and deposits, which have their own regime; and (c) such other persons, classes of persons or receipts as may be notified by the Central Government.
The penalty falls on the recipient
Section 451 imposes a penalty equal to the amount received in contravention. Note who bears it: the section prohibits receiving, so it is the recipient — the seller, the contractor, the hospital — who is penalised, not the payer.
Worked example
A business receives cash in tax year 2026-27 as follows.
| Receipt | Breach? | Limb |
|---|---|---|
| ₹1,90,000 from a customer for one invoice, in one day | No | Below ₹2,00,000 on all limbs |
| ₹1,20,000 and ₹1,10,000 from the same customer on the same day, different invoices | Yes | Limb (a) — ₹2,30,000 in aggregate in a day |
| ₹5,00,000 invoice settled as ₹1,80,000 on three separate days | Yes | Limb (b) — a single transaction of ₹2,00,000 or more |
| ₹90,000, ₹80,000 and ₹70,000 for catering, décor and photography for one wedding | Yes | Limb (c) — ₹2,40,000 relating to one event |
| ₹4,00,000 accepted as a loan in cash | Outside section 186 | Sub-section (2)(b) — governed by section 185, penalty under section 450 |
The penalty under section 451 is equal to the amount received — so the wedding vendor in row four faces a penalty of ₹2,40,000 on receipts of ₹2,40,000. The customer faces nothing under this section.
Compliance checklist and due dates
- Set a hard cash-receipt ceiling below ₹2,00,000 per person per day in your billing system.
- Aggregate across invoices for the same customer on the same day.
- Never split a single transaction of ₹2,00,000 or more across dates — limb (b) looks at the transaction, not the receipt.
- Identify events and occasions — weddings, projects, packages — and aggregate all related receipts from one person.
- Remember loans and deposits are outside this section; they fall under section 185.
- The penalty under section 451 falls on the recipient, so train front-office and billing staff, not just accounts.
- Keep evidence of banking-channel receipt — account payee instruments or electronic records.
Common mistakes
- Testing only the day limit and overlooking the single-transaction and one-event limbs.
- Splitting a large bill across days in the belief that it cures the breach.
- Assuming the payer is penalised. Section 186 prohibits receiving, and section 451 penalises the recipient.
- Treating a cash loan as a section 186 issue; sub-section (2)(b) excludes section 185 transactions.
- Accepting a non-account-payee cheque as a compliant mode.
This is an explanatory guide, not tax advice, and it does not reproduce the section in full. Read the bare text of the section before you rely on it, and check for later amendments, the Income-tax Rules made under the new Act, and CBDT circulars and notifications.