Cash Transaction Limits Under Income Tax Act: A Quick Guide
The Income Tax Act in India has specific limits for cash transactions to promote transparency and prevent tax evasion. Here are the key limits and penalties to be aware of:
Cash Receipt Limit
– ₹2,00,000 Limit: You cannot receive ₹2 lakh or more in cash from one person in a day, for a single transaction, or for transactions relating to one event or occasion. Payments must be made through cheque, draft, or digital mode.
– *Penalty*: If you receive ₹2 lakh or more in cash in violation of Section 269ST, the penalty will be 100% of the cash received .
Cash Loan/Deposit Limit
– ₹20,000 Limit: You cannot take or accept a loan/deposit in cash exceeding ₹20,000. Repayment of loans/deposits in cash above ₹20,000 is also prohibited. Transactions must be made via account payee cheque, draft, or electronic mode.
– Penalty: Violation will result in a penalty equal to the loan/deposit amount .
Other Important Limits
– Property Transactions: No person can accept ₹20,000 or more in cash for sale of immovable property, advance, or consideration.
– Business Expenses: Cash payments exceeding ₹10,000 per day to a single person for business expenses are disallowed as deductions. For payments to transporters, the limit is ₹35,000.
– Donations: Cash donations above ₹2,000 are not eligible for deduction under Section 80G .
Takeaway:
Avoid large cash dealings and use banking channels for transactions to prevent penalties and ensure tax compliance.
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