Section 186: mode of undertaking transactions - the ₹2,00,000 cash receipt limit

Introduction

Section 186 tests a receipt in three ways: the total from one person on one day, the amount for one transaction, and the amount connected with one event or occasion from that person. A receipt is covered if any one test reaches ₹2,00,000.

The provision lists permitted payment modes and specific exceptions. Loans, deposits and specified sums of the kind addressed by Section 185 are carved out of this section and require their own separate check.

Key takeaways

The core restriction

No person shall receive an amount of ₹2,00,000 or more, except through an account payee cheque, account payee bank draft, electronic clearing system through a bank account, or any other prescribed electronic mode, where the amount is received:

• in aggregate from a person in a day; or
• in respect of a single transaction; or
• in respect of transactions relating to one event or occasion from a person.

Exceptions

The restriction does not apply to:

• any receipt by the Government, any banking company, post office savings bank, or co-operative bank;
• transactions of the nature referred to in Section 185 (loans, deposits and specified sums, which are separately regulated);
• such other persons or class of persons or receipts, as may be notified by the Central Government.

Hypothetical examples of the three tests

Example 1 (one person, one day): Assume a customer pays a shop ₹1,20,000 in cash in the morning and ₹90,000 in cash that evening for unrelated purchases. The aggregate received from that person that day is ₹2,10,000, so the daily test in subsection (1)(a) reaches the statutory threshold even though neither payment does so alone.

Example 2 (one event): Assume the same customer makes two cash payments of ₹1,50,000 on different days for transactions relating to one event. The combined ₹3,00,000 reaches the event-or-occasion test in subsection (1)(c). A different payment date does not, by itself, take the receipts outside that test.

These examples assume no exception under subsection (2). In an actual case, check whether the receipts are from a person or transaction excluded there and use a permitted mode where subsection (1) applies.

Step-by-step flow for applying Section 186

1. 1

   Is the receipt covered by an exception?

   Section 186(2): receipts by the Government, a banking company, post office savings bank or co-operative bank; transactions of the nature covered by Section 185; or persons or receipts notified by the Central Government.

   • Yes: Section 186(1) does not apply.
   • No: Go to the next step.
2. 2

   Is ₹2,00,000 or more received from one person in a day (in aggregate)?

   • Yes: Use a permitted mode.
   • No: Go to the next step.
3. 3

   Is ₹2,00,000 or more received for a single transaction?

   Count all instalments of the same transaction, even if received on different days.

   • Yes: Use a permitted mode.
   • No: Go to the next step.
4. 4

   Is ₹2,00,000 or more received from a person for transactions relating to one event or occasion?

   • Yes: Use an account payee cheque, account payee bank draft, ECS through a bank account, or a prescribed electronic mode.
   • No: Section 186(1) does not restrict the mode of receipt.

Practical checklist

Glossary

Single transaction

One deal, such as one sale, counted as a whole even if paid in parts.

Event or occasion

A single function or occasion; receipts from a person for transactions relating to it are added together.

Permitted modes

Account payee cheque, account payee bank draft, ECS through a bank account, or another prescribed electronic mode.

Frequently asked questions