Cash Transaction limits FY 2025-26 in India
Cash Transaction Limits and Precautions
The video details limits enforced by the Income Tax Department, RBI, and ED to monitor cash transactions.
1. Cash Holding at Home (Source of Cash)
- No Absolute Limit: There is no specific legal limit on how much cash you can keep at home, provided you can clearly explain and prove the source of the cash
- Justification of Source: Legitimate sources include:
- Maturity of Fixed Deposits (FDs)
- Sale of property .
- Compensation received
- Gifts from defined relatives (Father, Mother, Spouse, etc.)
- Daily business sales/income (must be recorded in books of account)
- Agricultural income (with proper documentation)
- ITR Justification: The cash must be justifiable with your Income Tax Returns (ITR) and Balance Sheet (Cash-in-Hand)
- Penalty for Unexplained Cash: If the source of cash is not satisfactorily explained, you can face a penalty, interest, and tax up to 137% of the unexplained amount
2. Cash Transactions Reported by Banks (SFT Reporting)
Banks are mandated to report high-value cash transactions to the Income Tax Department:
| Account Type | Transaction Limit (Aggregate in a Financial Year) |
| Saving Bank Account | Cash Deposit or Cash Withdrawal exceeding ₹10 Lakh |
| Current Account | Cash Deposit exceeding ₹50 Lakh |
- PAN Requirement: PAN is required for cash deposits exceeding ₹50,000
- Joint Accounts: Reporting is done against the Primary PAN holder
3. TDS on Cash Withdrawal (Section 194N)
TDS (Tax Deducted at Source) applies to cash withdrawals above a certain limit from a bank account:
- If ITR NOT filed for the last 3 Financial Years:
- Cash withdrawal between ₹20 Lakh and ₹1 Crore: 2% TDS on the amount exceeding ₹20 Lakh
- Cash withdrawal above ₹1 Crore: 5% TDS on the amount exceeding ₹1 Crore
- If ITR filed for the last 3 Financial Years:
- Cash withdrawal up to ₹1 Crore: No TDS
- Cash withdrawal above ₹1 Crore: 2% TDS on the amount exceeding ₹1 Crore
4. Limits on Cash Receipts and Payments
| Transaction Type | Cash Limit | Relevant Section | Consequence of Violation |
| Receipt of Cash (Sale, Services, etc.) | Cannot receive ₹2 Lakh or more in aggregate from a single person in a day, for a single transaction, or for a single event/occasion | Sec 269ST | 100% penalty on the receiver (equal to the amount received) |
| Business Expense Payment (For Tax Audit cases) | Cannot pay more than ₹10,000 in cash for any single expense to a person in a day . | Sec 40A(3) | Disallowance of the expense (added back to income) |
| Cash Gift Receipt | The general cash receipt limit of ₹2 Lakh applies | Sec 269ST | 100% penalty on the receiver |
| Loan/Deposit (Taking or Repaying) | Cannot take or repay a loan, deposit, or specified sum of ₹20,000 or more in cash | Sec 269SS/269T | 100% penalty (equal to the loan/repayment amount) |
| Donation for Deduction (80G/GGC) | Cash donation is limited to ₹2,000 | Sec 80G/80GGC | Disallowance of the deduction |
5. Cash Gifts and Income Tax (Section 56(2)(x))
- Gifts from Relatives (or on Marriage): These gifts are fully Tax-Free (though the ₹2 Lakh cash limit still applies)
- Gifts from Non-Relatives: If the aggregate value of gifts (cash or kind) from non-relatives exceeds ₹50,000 in a financial year, the entire amount is added to the receiver’s taxable income
6. Income Tax Notices
The video mentions the following sections under which an Income Tax Notice may be issued for undisclosed or high-value cash transactions
- Section 143(2): Scrutiny Assessment for discrepancies in ITR (e.g., high cash deposit reported in the bank’s SFT data vs. low income declared in ITR).
- Section 148: Income Escaping Assessment if ITR was not filed but high-value transactions are recorded.
- Section 133(6): A general notice seeking information/clarification on any transaction.