In Budget 2017-18, a ban on cash transaction of more than Rs 3 lakh has been proposed. The same has been mentioned in the Finance Bill 2017. But, the Govt of India has made amendment in Finance bill and has reduced the Cash transaction limit to Rs 2 Lakh.
This amendment has been passed through Finance Act, 2017 and notified on 31-March-2017. Complete details on Rs 2 Lakh Cash Transaction limit have been provided in a new section referred to as ‘Section 269ST‘.
As per Section 269ST, any person who enters into a transaction of Rs 2 Lakh or above in cash, will be liable to a penalty of an amount equivalent to the amount of transaction.
For example : If you buy an expensive watch for cash worth Rs 5 Lakh, it is the shopkeeper who will have to pay the tax (penalty) of Rs 5 Lakh. So, here the tax rate is 100%.
Though this new section on Cash Transaction limit sounds simple, we need to go through it in details, as I believe that this may have quite an impact on our daily financial lives.
What does Section 269ST say?
With effective from 1st April, 2017, no person shall receive an amount of Rs 2 Lakh 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.
The new Cash transaction limit is not applicable, if a person receives the amount through an Account Payee Cheque (or) an Account Payee Bank Draft (or) through use of electronic clearing system through a bank account. (Looks like, any receipts done through e-Wallets like Paytm, credit cards etc., may also be hit by this new amendment, need more clarity though.)
Kindly note that Penalty u/s 271DA will be imposed on a person who receives a sum of Rs 2 Lakh and above in cash. The extent of penalty will be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention.
Cash Payments for Covid Treatment & Income Tax rule | CBDT Latest Circular :
- The existing Income tax rules do not permit Cash payments beyond Rs 2 lakh as per Section 269ST.
- However, the government has now allowed hospitals, dispensaries and COVID-19 care centres to accept cash payments in excess of Rs 2 lakh from patients or their kin till May 31.
- All such entities would be required to obtain PAN or Aadhaar of the patient and the payee and also the relationship between them.
- The notification is applicable for all cash payments made on/ after 1st April 2021 till 31st May 2021.
Section 269ST & Rs 2 Lakh Cash Transaction Limit – Examples
Let us understand the above three points with examples;
A. Single Person : Cash Receipt of Rs 2 lakh or more, from a single person in a day is not allowed even if the amount has been paid through multiple transactions during the day which are below Rs 2 lakh.
For example : Mr Virat buys a gold chain worth Rs 2 Lakh and pays the amount by cash to Mr Sonesh on a single day in 4 equal installments of Rs 50,000 each. As Mr Sonesh accepted cash worth Rs 2 Lakh from a single person and in a single day, section 269ST is applicable in this case. Sonesh has to pay a penalty of Rs 2 Lakh.
B. Single Transaction : Cash receipts of Rs 2 Lakh or more which are related to a single transaction are prohibited.
For example : Mr Kejriwal goes through a medical surgery and the hospital charges him a bill of Rs 4 Lakh. Kejriwal clears the bill in 4 installments of Rs 1 Lakh each on four different dates. Here, the cash receipts got by hospital are less than Rs 2 Lakh and have been received on different dates.
Whether this transaction violates section 269ST? – Yes. Hospital has to pay the penalty. Because, they received the payments with respect to single bill / transaction. So, splitting of payments over several days is prohibited.
C. Single Event / Occasion : Cash transactions or cash receipts related to a single event or occasion, can not be more than Rs 2 Lakh.
For example : Nagachaitanya gets married to Samantha. On their wedding occasion, their relatives gifted Cash amount worth Rs 10 Lakh on different dates. Even if we assume that each person has gifted cash worth less than Rs 2 Lakh, are these receipts come under the purview of Section 269ST? Is penalty applicable?
Yes, penalty can be levied. Here, marriage is a ‘single occasion’ and cash gifts worth Rs 2 Lakh or more can not be received from relatives and other persons.
Can I make Cash Deposit / Cash Withdrawal of more than Rs 2 Lakh from my Bank?
What if you would like to make cash withdrawal from your bank account or ATM an amount of Rs 2 Lakh or more in a single day? Yes, you will be liable to pay penalty of equal amount. For example, if you withdraw Rs 10 Lakh from Bank on a single day, you are liable to pay penalty of Rs 10 lakh irrespective of how you are going to use that amount.
So, Cash withdrawals of Rs 2 Lakh or more, from your Bank through your saving bank account, Current account, bank loan accounts like CC Limit, OD limits etc., are subject to penalty.
Latest Update (05-Apr-2017) : It has been decided by the Govt that the restriction on cash transaction shall not apply to withdrawal of cash from a bank, co-operative bank or a post office savings bank. Necessary notification in this regard is being issued.
What about Cash deposits at Bank? This can be a little tricky.. For example, if you deposit Rs 10 Lakh in a single day in your Bank account, it is then assumed that you have received cash receipts of more than Rs 2 Lakh and the same has been deposited into the banking system. If that is not the case, you may have to prove it otherwise, that you have received this amount from different persons on different dates..
Important Points
- Based on my interpretation of Section 269ST, payment modes like bearer cheque and self-cheque will also be considered on par with Cash based transactions only.
- It has been clearly stated that penalty (if any) is chargeable to an individual who violates section 269ST, even if you do not have PAN and/or is not a tax assessee.
- The restriction of receipt of money in Cash of Rs 2 Lakh or above in cash is applicable irrespective of whether it is for personal / business purpose, capital or revenue in nature, tax-free or taxable income.
- Kindly note that the payer of money is not liable to pay any penalty, it is the receiver of cash who has to bear the penalty u/s 271DA .
The main objective of the central Govt for implementing this amendment is to discourage payments by cash and curb black money menace to certain extent. Let’s hope that they provide more details / clarity on nitty-gritty of section 269ST & Rs 2 Lakh Cash Transaction limit.
Other Cash Related restrictions :
- Donations in cash exceeding Rs 2,000 are not permitted (Donations can be claimed u/s 80G)
- Premiums on Health insurance policies paid in cash can not be claimed u/s 80D
- Loans or Deposits can not be repaid in cash in excess of Rs 20,000 or more
- Payment of above Rs 10,000 per person, can not be made for any business payment towards any expenses (or) purchase of capital asset.
- One should not accept a loan or deposit or sale consideration of immovable assets in cash in excess of Rs. 20,000.
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(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Post first published on : 04-April-2017)
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HELLO,
I PURCHASED GOODS FROM MR.ABC IN THE MONTH APRIL, THE VALUE OF GOOD IS 5L, I REPAY IN MAY MONTH 3.1L VIA BANK AND 1.9L VIA CASH, LIKE THAT I HAVE 3 MORE BILLS IN THE MONTH JUNE JULY AND AUGEST, NOW MY QUESTION IS CAN I PAY 2L IN CASH FOR EACH BILL IN DIFFRENT DATE,
WHAT ? IT COME UNDER Section 269ST ?? CAN PLEASE TELL ME
Marriage occasion par gift amount whatever it may be tax nhi Lagta he. But above 2 Lac vale example of single transaction me penalty lag rhi he. Please explain .
Dear Priyanka,
One can receive any amount of Gifts on the occasion of marriage through non-cash mode. If cash mode, Rs 2lakh is the limit.
I will deposit Rs 75,000 / – in gold in a private bank. 225000 / – on this day, withdrawing gold. SECTION 269ST Affected?
I have pledged Rs.75000 / – to a mortgage bank and I have taken a pledge of Rs 225000 / -.Section 269ST APPLICABLE
Hi Sir, I am a Kidney Transplant paitent. I had took Rs. 4,00,000/= by cash from a person for my medical expences and that was on different dates. Now I am not able to clear my debts. So I am selling my property to him to clear my debts. For the property registration rest of the amount will be taken by Demand Draft. Can I show Rs. 4,00,000/= taken by cash in the sale deed, will it be a problem?
Dear Preetam,
I believe that one can not show above Rs 20000 as a cash transaction in the Sale Deed.
WE SELL UNIFORMS IN SCHOOLS. THE SCHOOLS ARE LOCATED IN OTHER STATES. SO WE SEND THE INVOICE TO THE SCHOOLS. BUT THE SALES IS CARRIED OUT BY OUR STAFFS IN THEIR PREMISES, AND CASH IS ALSO COLLECTED FROM STUDENTS BY US.
IS IT A VIOLATION OF THIS ACT.
Dear LAKSHMI ..Kindly consult a CA in this regard..
I am a trader. I sold for Rs.300000 to a customer. He paid Rs.175000 as cash and transferred to my bank account Rs. 125000. Will it attract penalty u/s 271DA
Dear Salim..As the amount paid in cash is less than Rs 2 lakh, I believe that penalty may not be applicable in this case..
NO NO VIOLATION OF SECTION 269ST SO NO PENALTY
Thanks for the details. I am moving to lease house where the landlord has asked to give 5 lakhs in cash form and balance amount in check/NEFT form, he will mention the same in the lease agreement. What kind of problem we both face in the future.
Dear Shashi,
What is the amount that is going to be mentioned in the Lease agreement?
If your landlord (receiver) receives Rs 2.5 lakh in cash, he/she may get penalized (if this is not accounted for properly)..
Iam tranfering everday 20k from my ICICI bank account to My own SBI account to maintain high net balance, My doubt by doing everyday 20K transction, I will face any Tax Issues
Dear shinde,
As long as you declare this income in your ITR then no issues for cross transferring your money between your bank accounts.
I deposited rs 315000 cash with pan in insurance company in june 2017 and bought two policies for my kids in both the policies i am proposer what should be done now
Dear ankur,
If at all there is any issue, it is the receiver of Cash who has to pay the penalty.
As long as you have accounted for this money, kindly do not worry on this..
hi, I have doubt, Can you clarify
Iam tranfering everday 20k from my ICICI bank account to My own SBI account to maintain high net balance, My doubt by doing everyday 20K transction, I will face any Tax Issues?
Sir,
I issued a cheque of Rs. 350000/- @ 1st March 2018 to my friend as a loan, and he repaid 175000/- on 28th March 2018 in cash and other 175000/- in cash on 2nd April 2018. Is it under section 269ST?
Dear Kamal,
Kindly note that Penalty u/s 271DA will be imposed on a person who receives a sum of Rs 2 Lakh and above in cash. The extent of penalty will be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention.
The last sentence is very important.
Hi Sir,
Last month i sell my land( Chennai City) ,by unknowing i received Rs 400000 by cash . I want pay penalty while filing.
Dear Rajesh ..Ok, you may consult a CA when filing your next Tax Return.
Hi Srikanth,
If my dad wanted to gift me Rs.10 Lacs as a one time gift from his assets, is the amount taxable??
Dear Anita,
No, it is a tax-free transaction.
Kindly go through this article @ Got a Gift? Find out, if it is Taxable or Tax-free?
Dear ,
Can You Give Me Details Than For Registered To Registered party Sale Amount Of More then 50000 Rs . Yet What We have Received A Cash From party.
How many Cash Received From Party Against GST Sale Of Bill Amount more Than Rs 50000.00.
It is very useful information for us.
Thanks
Can a partner, bring above rs.2 lakh cash as capital( through current account)
Dear sunil ..Suggest you to kindly consult a CA.
Sir
I want to ask about cash sale
I have buyer outside city and they are not registered with GST
They Say that They will deposit cash in my bank accoiny and ask me to send material
Amount can be 20000,30000,40000
How to make entry in Books
hi
cash bill is possible below 2lakh
1.issue cash bills/cash receipt-> cash a/c debit and sales+output gst credit;
2.and pass a deposit entry-> bank debit and cash credit (contra)
thanks
company can issue the cash receipt of Rs.9999/-, 200 times in ayear?
We are distrubutior in fmcg products
My question is in one outlet crossing 2 lack in a year 17 – 18.the bills different in dates & recipet in different date. Totally 20 invoices, sir can 269st apply or not
Dear Shivaraj ..Kindly consult a CA.
sir mere advocate kahte hain ki ek din me kisi c person se 10’000/. se jyada cash reciep nahin kar sakte hain agar 1 lakh lena hai 10_10 hajar 10 din me lena hai kya yah sahi? mai traders hoon
Dear Abdul.. I think your lawyer is referring to this point – ‘Payment of above Rs 10,000 per person, can not be made for any business payment towards any expenses (or) purchase of capital asset.’
Suggest you to consult a CA and plan your business transactions.
I received cash on my marriage more than from different peoples other than relatives in total more than 2 lakhs.
How to show this in ITR?
Dear Akhilesh,
The gifts received on the occasion of marriage are tax-exempt.
You can declare the amount under ‘exempted income’ section of ITR.
Related article : Got a Gift? Find out, if it is Taxable or Tax-free?
WE ARE HAVING COMMERCIAL VEHICLE DEALERSHIP. OUR ALL VEHICLE COSTS ARE MORE THAN 8 LACKS. WE ARE FACE PROBLEM FOR DOWN PAYMENT. CUSTOMERS ARE ASKING TO PAY DOWN PAYMENT IN CASH.
MY QUERY IS HOW MUCH AMOUNT CAN I TAKE IN CASH AS A DOWN PAYMENT FROM CUSTOMERS.
Dear Nikhil,
Up to Rs 2 Lakh per customer.
But advisable to go for non-cash mode only.
Also, kindly consult a CA in this regard.
Sir tractor bill 500000 cash recd 200000
Sir,
My wife and I are partners in a firm. Can the cash collected on behalf of the firm (receivables) be deposited in our personal bank accounts instead of the firm’s. The receivable is about 600000 and it is received from about 40 differently people( approx 15000 each)
Dear Saurav ..Kindly consult a CA.
sir,
i had issued bill in fy 14-15 more than 2lakh and now party giving me cash can i accepted or not??
Dear parinder ..Kindly accept non-cash payments only.
Dear sir
I deposited rs 2 lakh to one of the company from where I deal and now they are not accepting that amount and even not ready to refund the amount cos they are saying they have to pay 100 penalty on this
Sir any solution so i can get my amount back
Actually I rec that amount through my so many customers it’s not one bill payment
sir, i am an accountant in TATA MOTORS , MY QUERY IS , ONE OF OUR CUSTOMER BOUGHT A CAR FROM US…BY MISTAKE HE DEPOSIT 2 LAKH CASH IN OUR ACCOUNT AS A PAYMENT…WHAT CAN I DO TO AVOID THE PENANLTY….PLZ REPLY
Dear BHUPENDER ..You may refund the amount and ask him/her to pay it in non-cash mode.
Hello Sreekanth,
Well explained. I have a question. I got an amount of Rs 3lakhs deposited into my account as cash for the purpose of purchasing a vehicle from my father who withdrawn that amount from a cooperative bank FD account. Will this attract any kind of penalty? A response will be much appreciated.
Regards,
Anoop
Dear Anoop,
Suggest you to get a Gift Deed done for the same amount.
This can be treated as a gift and tax-free for both of you.
Kindly read : Gifts & tax implications!
Thanks for the response Sreekanth. To be clear, if a gift deed is done, are you implying that the 2 lakh cash transaction limit and its penalty do not apply?
Dear Anoop,
Kindly note that Penalty u/s 271DA will be imposed on a person who receives a sum of Rs 2 Lakh and above in cash. The extent of penalty will be a sum equal to the amount of such receipt. The said penalty shall however not be levied if the person proves that there were good and sufficient reasons for such contravention.
So, if one has a valid and sufficient reason, there is no need to worry.
You may kindly consult a CA as well.
Thanks a lot Sreekanth for your quick response.
Sir
My mother sold a property for six lakh.she is senior citizen. She received four instalments of 1.5 lakh in four month.registrar has done registry also last in January 2018.is there any penalty. If there are chance of penalty how we can avoid it now.
Dear gagan .. One should not receive more than Rs 20,000 in cash with respect to transactions of immovable properties.
Also, you need to check the calculations for any capital gain tax implications.
Kindly consult a Chartered accountant.
Hi Srikanth,
We are selling a property of my father (Legal Heirs – Mother, Son & 2 Sisters), who is no more, for a value of Rs. 600000. We four legal heirs are supposed to receive each Rs. 1,50,000/- by this sale. Can we receive the amount in Cash.
Dear VEERAMANI ..Is seller paying entire Rs 6 Lakh by cash?
Proposed New Section 269ST reads as under:
No person shall receive an amount of two lakh rupees 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,
Entire 6 lakhs is related to one single event so not allowed irrespective recipients are four people
i have deposit cash above 2.00lakhs in my sb account at different interval say in april17 around 48000,then in july 48000,september 25000,december 33000&jan 2018 24000 will this have any penalty.
Dear rajendra ..As long as you have income is in line with your deposits and file your income tax return accordingly, should not of any issue.
Hi Sir
Thanks for your article. Nicely explain.
My query is little bit complex. Hope you can help me out in this
->Can i gift my sister Rs 1 lakh (via bank transfer) and she (in her name only) will utilize that amount to invest in some capital asset things like (property or shares)? is there any violation in doing so or any tax she has to bear when received such amount?
-> is this amount is added to his annual income and accordingly tax slab applicable? or this 1 lakh is totally tax free
PS: I’m Govt servant; Just in case if you are unsure about govt conduct rules, you can elaborate with a view as a case of ordinary person instead Govt official.
Thanks!
Dear Varun,
1 & 2 – Yes, you can gift the amount to your sister. It is a tax-free transaction for both of you. She can disclose this amount in her ITR under Exempt income section. She can re-invest the amount in any investment product(s) of her choice. If this results in any taxable income then she has to disclose that when filing ITR. For ex:If she invests this Rs 1 lakh in a bank fd, then interest income on FD is taxable in her name.
Read : Gifts & Tax implications
Sir,
I want to sell a car at Rs.1,40,000/-. The buyer wants to pay the amount of Rs.1,40,000/- in cash. Can I deposit this cash amount in a single transaction in my Bank Savings account?
Dear Jayasri ..You may do so, as the limit is up to Rs 2 lakh.
I’m purchasing a house of 30 lakhs . seller demanding 4 lakhs as a agreement amount . can I pay him 4 lakh s in cash.
Dear Sha..Any receiver of cash above Rs 2 lakh can be subject to penalty.
Then plz tell how can I deal with him I want to pay him 4 lakhs as margin amount
Dear Sha..You may give Cheque or do online transfer..
Hello Sree,
I am selling my old car at the price of 2.5L and dealer who is buying is paying me in cash only. I am against it buying a new car and have to pay down payment of 3+ L. How do I manage this transaction? Kindly suggest
Dear Mollins,
If you go by current tax law, as a receiver, you may have to bear the penalty.
Suggest you to accept the payment in non-cash mode or at least in combination of cash+non-cash transactions.
Hello sir …
Me gaadi purchase kar rha hu 161604 rs mjhe pay krna hai cash me kar sakta hu??
Sir ,
i have purchased agriculture land in name of my wife in Nov. 2014 by cash for 7.5 lac and sold in sep. 2017 for 12 Lac which . Total amount received in account, now i am purchasing plot in unauthorized colony in Delhi for 10 lac in my wife name.
The amount will be paid by RTGS.
Please tell me that there is any question from IT deptt. and capital gain tax to be paid at capital gain amount.
Dear Kabir,
Kindly go through this article : Sale of Agri land and tax implications!
THANKS
Dear Sir,
The lad is in rural area then we have to show amount (12 lac) in ITR form or not, previously we are ITR4 (for tuition), now which ITR form to be filled , please clarify.
Dear Kabir,
The IT dept releases ITR forms for FY 2017-18/AY 2018-19 only in April 2018.
Kindly read : ITR forms for FY 2016-17
Hi Shrikanth,if my agency sale goods in cash to someone who is a registered dealar in cash during the year.But the amt. is less than 10000 per bill.Will this
attarct any penalty?
Awesome, detailed coverage in deed!!
My parents (senior citizens) are planning to sell their old property(house) now. Buyer said he would pay the advance in cash sometime this week in cash, which would be more than 5 lakhs.
I understood cash deposit into bank account over 2 lakhs (here it is 5 lakhs) attract penalty/tax/HUGE service tax.
We asked for cheque payment to be on safer side.
My question – Is the penalty applicable for online transfer and cheque payment also?
Dear Bhargavi,
If you receive/deposit money in non-cash mode ie cheque or online transfer then penalty under section 269 is not applicable.
Thanks a lot!
Just in case, if they happen to receive in cash, is it fine deposit less than 2 lakhs (say, 1,90,000) in the bank (same) account on different days?
Some light here please..
Just in case, if the buyer of the property prefers to pay us in cash, is it fine deposit less than 2 lakhs (say, 1,90,000) in the (same) bank account on different days?
or atleast different bank accounts of the same person?
Dear Bhargavi,
The receiver of cash amount of Rs 2 Lakh and above can be penalized.
Suggest you to avoid cash mode, if you have to deposit this money in bank account(s).
Thanks a lot!
Sir is monthly rent reciept from a single tenant of 25000rs by a landlord violates this section as yearly reciepts exceeds 200000??
Dear Diya,
That’s ok if the landlord discloses this income in his/her income tax return.
But, it’s advisable to switch to non-cash mode.
I have bought a plot of 200 sq yards for a total sale consideration of 4,60,000 (Four Lakh Sixty Thousand Only) in 24 months instalment. I am getting the same Plot registered now.
However, as the Government Value of the plot is 12,00,000 (Twelve Lakhs Only), we will have to mention the value as 12 Lakhs in the Registry documents (the seller of the land has agreed to sign the documents at this value, though he has not actually received that much amount).
As the registry document says that I am paying 12 Lakhs in cash to the land seller on the day of registry, will I be liable to pay any penalty under IT Act 269ST or the Seller will be liable to pay the penalty. Will the payer have any legal hurdles and would be questioned about the source of accumulating 12 Lakh Rs in cash.?
Dear Mohsin,
I believe that you can register the property for Rs 4.6 Lakh but have to pay the stamp duty and registration fee at Govt valuation of Rs 12 Lakh.
Also, as per the current registration rules, you need to pay this Rs 4.6 lakh through non-cash mode only.
Suggest you to kindly consult a CA/lawyer and get this deal done!
Dear Mr Sreekanth,
Thanks for your prompt reply.
However, I have already paid 4.6 Lakhs in Cash (spread over 24 months), but we would have to mention in the Registry document that the full amount of 12 Lakhs is being paid now (in Cash- as there are no supportings to the payment made).
Hence, please clarify if the Payer (me) would have any liability for penalty us 269ST or only receiver of 12 Lakhs is liable to pay penalty ?
Dear Mohsin,
I am not sure if the Sub-registrar will accept the document if you mention the mode of payment is cash.
The receiver of cash has to bear the penalty (if any).
For wholesaler to single retailer any limit for transaction in cash for one financial year
Hi Sir …
Can I purchase a vechile of 1,85,000₹ in cash in one single entry. As the owner is demanding for cash and the vechicle is in very good condition. I don’t wanna miss this deal. Is it legal to make the deal ?
Dear Siddak..As it is below Rs 2 Lakh limit, you may consider it!
Sir, I am a senior citizen (77 yrs) and I want to share my savings with my children, one of them is an NRI and have NRO account. Kindly guide me as to how much of earmarks about 50 lakhs I can deposit to my sons NRO account. Is there any limitation of deposit at a time and in a financial year. Can me and my wife deposit separately ? all deposits will be done by electronic transfer as and when some our fixed deposits mature.
Dear Natarajan Ji,
Deposit into NRO account either in rupee funds or foreign currency is permissible to account holder only. However, deposit from any other person like parents etc (only Resident Indians) should be treated as a rupee gift or loan under FEMA deposit regulations.
The rupee gift so given,has to be in compliant with Liberalised Remmittance Scheme (LRS). Under LRS for remittances towards gifts and donations the maximum amount permissible is USD 250000 per financial year.
Also, your son may have to fill up customer declaration form (with his bank) for credits into his NRO account , wherein he is supposed to specify sources of funds.
I believe there is another option, wherein you can transfer the funds directly to your Son’s overseas foreign account (if any).
Suggest you to also make a property Gift deed regarding this.
Related article : Gifts & Tax implications!
Hi,
Can I receive Rs. 5 lakhs from my wife’s uncle to clear my debts. How to receive this amount in by bank account, such that tax the is evaded?
Thanks
Dear Aslam.. You may take it in cheque or bank transfer mode, as an interest-free loan.
In case you take it as a Gift, kindly read this article for more details regarding gifts and tax implications.