As India tightens its scrutiny on cash transactions, citizens are increasingly concerned about what is permitted and what could trigger a major penalty. To clarify the confusion, investment banker CA Sarthak Ahuja recently broke down the government’s strengthened rules around cash dealings — and why everyone needs to be cautious.
Unexplained Cash Can Attract Up To 84% Tax
The government has significantly intensified its crackdown on unaccounted cash. According to the new provisions, if income tax officials find money at your residence during a search and you cannot explain its source, the department can impose a tax and penalty amounting to up to 84% of the total cash recovered.
This 84% includes tax, surcharge, cess, and penalty, meaning almost the entire amount could be taken away if it remains unexplained.
How Will the Department Detect Cash Movements?
To track high-value cash withdrawals, the government has made it mandatory for banks to report large transactions to the Income Tax Department.
Ahuja explained:
- “If you withdraw more than ₹10 lakh in cash from your savings account in a year, the bank must report it.”
- “If you withdraw more than ₹20 lakh, the bank will even deduct TDS before handing over the cash.”
These alerts help authorities monitor unusual cash patterns. If officials detect suspicious activity, they can initiate inquiries or even conduct search operations.
Cash in Property Deals Can Lead to 100% Penalty
Real estate transactions involving cash are under strict surveillance. Under the income tax rules, if a seller receives more than ₹20,000 in cash as part of a property deal, the entire cash amount becomes liable for a 100% penalty.
This means that if someone accepts ₹50,000 in cash during a property sale, they may be required to pay an additional ₹50,000 as penalty.
Cash Receipts Exceeding ₹2 Lakh Can Also Be Penalised
The law also restricts accepting cash beyond a certain limit in business or personal dealings. Ahuja highlighted:
“If you receive more than ₹2 lakh in cash from a single person in one day — for goods, services, or any purpose — the penalty is 100% on the entire amount.”
These restrictions apply universally, whether you run a business, provide professional services, or receive money for personal reasons.
Cash Loans & Gifts From Friends or Relatives Not Allowed
Despite awareness drives, many people still borrow or lend money in cash. But the rules clearly prohibit taking or giving loans in cash above permitted limits. Even personal transactions — such as borrowing money from a friend — can violate income tax law and invite penalties.
Why These Rules Matter
The government’s objective behind these stringent measures is to curb black money, improve financial transparency, and shift citizens towards banking channels and digital transactions. With banks reporting high-value withdrawals and property deals under constant monitoring, cash dealings now carry real risks.
