Section 185 - Mode of taking or accepting certain loans, deposits and specified sum
Simple decode The threshold is lender-wise and looks at the fresh amount, unpaid earlier balance, and their aggregate. It is not a simple per-payment cash ceiling. A cash receipt of ₹15,000 can breach the section if ₹10,000 from the same person is already outstanding. The immovable-property “specified sum” is covered even if the sale ultimately does not happen.
Reviewed by CA Nikhil Gupta · Updated 9 October 2026
Current law and effective date
Section 185 is controlled against the consolidated Income-tax Act, 2025 as amended by the Finance Act, 2026. The Act and Income-tax Rules, 2026 operate from 1 April 2026; earlier years and saved proceedings require the repeal-and-savings framework rather than automatic migration.
Primary statute: Income Tax Department consolidated Act | Rules: Notified Income-tax Rules, 2026
2-minute decode
Simple decode The threshold is lender-wise and looks at the fresh amount, unpaid earlier balance, and their aggregate. It is not a simple per-payment cash ceiling. A cash receipt of ₹15,000 can breach the section if ₹10,000 from the same person is already outstanding. The immovable-property “specified sum” is covered even if the sale ultimately does not happen.
Who should use this section
Persons accepting covered loans, deposits or specified sums who must satisfy the statutory banking / electronic-mode thresholds and exceptions.
Old-law bridge
section 269SS
The old-law bridge is navigational, not automatic precedent transfer. Match the 1961 Act wording, saved proceedings, current 2025 Act text and effective date before importing an older interpretation.
Finance Act 2026 / current-law note
No section-specific Finance Act, 2026 textual substitution is separately flagged for section 185; the consolidated post-Finance-Act-2026 text remains the controlling version and must be used instead of pre-1 April 2026 extracts.
Professional alert
Run a counterparty-wise outstanding-balance check before receipt. Tag advances linked to immovable property separately. Preserve bank trail and instrument details for every receipt near the threshold.
Connected Income-tax Rules, 2026 and Forms
| Rule | Current control | Form |
|---|---|---|
| No provision-specific Rule/Form is directly prescribed for this section in the mapping used here. Apply the statute directly and check the current Rules where another provision cross-refers to them. | ||
Worked application
A company has an unpaid director loan of ₹12,000 and takes another ₹9,000 in cash from the same director. The new receipt is below ₹20,000, but the combined exposure is ₹21,000; section 185 is triggered unless an exception applies.
Evidence / compliance checklist
- Run a counterparty-wise outstanding-balance check before receipt (section 185 evidence control 1).
- Tag advances linked to immovable property separately (section 185 evidence control 2).
- Preserve bank trail and instrument details for every receipt near the threshold (section 185 evidence control 3).
Common mistake
A common section 185 error is to apply the old-law label or headline rate without rebuilding the current statutory conditions. For “Mode of taking or accepting certain loans, deposits and specified sum”, the safer control is to test the exact taxpayer/transaction facts, the operative tax year, every linked Rule/Form and the Finance Act 2026 consolidated wording. Run a counterparty-wise outstanding-balance check before receipt. Tag advances linked to immovable property separately. Preserve bank trail and instrument details for every receipt near the threshold.
Recommended approach
For section 185, start with the legal trigger in “Mode of taking or accepting certain loans, deposits and specified sum”, document the evidence for that trigger, then run the computation or procedural step against the current text. As a cross-check, verify this provision-specific checkpoint: General cash / specified-mode acceptance threshold: Rs 20,000 across the fresh, outstanding and aggregate statutory tests.
Thresholds, periods and timing checkpoints
- General cash / specified-mode acceptance threshold: Rs 20,000 across the fresh, outstanding and aggregate statutory tests.
- Specified co-operative-member transactions can use the statutory Rs 2,00,000 substitution where conditions are met.
Related provisions and interaction map
Section 185 must be reconciled with the other sections 185-189 payment-mode restrictions/definitions, the associated penalty or prosecution provisions, and any prescribed electronic-mode rules.
Current statutory text
Primary-source trail
Statute: Income-tax Act, 2025 as amended by Finance Act, 2026
Rules: Income-tax Rules, 2026
Law navigation: Income Tax Department 2025 Act / Rules hub
Quoting note: Use the official consolidated Act for verbatim legislative language.
FAQs
Does an old Income-tax Act, 1961 case automatically decide section 185?
No. The old-law bridge helps research, but transferability depends on materially matching language, transition rules and any Finance Act 2026 change.
Which text should be quoted in advice or litigation?
Quote the consolidated official statute for the relevant tax year. If this page presents a provision summary rather than complete statutory text, use the official consolidated Act for verbatim legislative language.