Know the key thresholds for savings, business, gifts, property, and more under Indian tax law
New Delhi: Managing cash transactions in India now comes with strict rules under the Income Tax Act. These laws help the government monitor large cash dealings and curb black money, tax evasion, and illegal financial activity. Whether you’re depositing cash in a savings account, gifting money, or buying property, there are specific limits you must follow.
As per the latest provisions, if you deposit INR 10 lakh or more in a savings account during a financial year, banks will report this to the Income Tax Department. For current accounts, the reporting limit is higher — INR 50 lakh per year. These are not taxable immediately, but authorities will monitor the source of funds.
Section 194N governs cash withdrawals. If you withdraw over INR 1 crore in a year, you’ll face a 2% TDS (Tax Deducted at Source). But if you haven’t filed your income tax returns for the last three years, even withdrawals above INR 20 lakh attract 2% TDS, and withdrawals above INR 1 crore attract 5% TDS. This TDS isn’t treated as income but can be adjusted in your ITR.
Under Section 269ST, receiving INR 2 lakh or more in cash in a single day, transaction, or from a person in a year is prohibited. Violating this can lead to a penalty equal to the amount received.
Similarly, Sections 269SS and 269T apply to cash loans. Accepting or repaying cash loans over INR 20,000 is banned. If violated, the entire loan amount can be penalized.
For those filing under Section 44AD/44ADA — presumptive taxation schemes for small businesses and professionals — cash deposits aligned with declared business turnover are allowed. But unaccounted deposits may attract Section 68, which can impose a 60% tax, 25% surcharge, and 4% cess if you fail to explain the source.
There are also special rules for current accounts. Banks may set varying cash deposit limits. For example, SBI allows INR 5 lakh to INR 100 crore/month, and HDFC allows deposits worth INR 60 lakh or 10 times the monthly average balance. Exceeding this may lead to extra charges.
Other cash-related rules include:
Cash Transaction Limit: Restricted to INR 2 lakh/day.
Cash Withdrawal Limit: Individuals can withdraw INR 1 crore/year per bank without TDS if compliant with tax filing.
Cash Gift Limit: Gifts up to INR 50,000/year are tax-free. Gifts from close relatives are fully exempt, no matter the amount.
Fixed Deposit: Tax-saving FDs allow up to INR 1.5 lakh/year.
Credit Card Bill in Cash: SBI caps it at INR 50,000/day, HDFC at INR 49,000.
Real Estate Transactions: Cash payments above INR 20,000 are not allowed. Buying a property in full cash is illegal. Even if recorded in a deed, cash must stay below this limit.
These laws are part of a wider effort to ensure transparency in India’s financial system. Citizens are urged to stay updated and comply to avoid penalties and legal trouble.
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