income tax return
Income tax rules: Even in this era of digital payments, the practice of cash has not completely ended in India. From everyday purchases to property purchases, people find it convenient to transact in cash. But, under the Income Tax Act 2025, many strict rules are applicable regarding the use of cash. The purpose of these rules is to stop tax evasion and make the economy transparent. If you exceed these limits knowingly or unknowingly, you may have to face heavy penalties. Tax2Win CEO and Chartered Accountant Abhishek Soni has given information about 8 important rules related to cash transactions, which are very important for every common man and taxpayer to understand.
- Cash receipt limit (Rs 2 lakh): As per the rules, you cannot accept Rs 2 lakh or more in cash from any one person in a single day or for any single event. If you break this rule, the Income Tax Department can impose a penalty equal to the entire amount taken.
- Taking a loan or deposit (Rs 20,000): If you are taking a loan from someone or accepting a deposit, then you cannot take Rs 20,000 or more in cash. To avoid penalty, always take loan of Rs 20 thousand or more through check or bank transfer.
- Loan repayment limit (Rs 20,000): Just as there is a limit for taking a loan, similarly there are rules for repaying it. You cannot repay a loan of Rs 20,000 or more in cash. For this also use of banking channel is mandatory.
- Payment of business expenses (Rs 10,000): If you are a businessman, then you cannot claim more than Rs 10,000 in cash to any one person in a day and claim it as tax exemption. However, for people involved in transport or freight business, this exemption is up to Rs 35,000.
- Cash donation or donation (Rs 2,000): People donate to save tax under section 80G. But if you donate more than Rs 2,000 in cash, you will not get any tax exemption on it. To avail the discount, donate online or by cheque.
- Withdrawal of large cash from the bank: Although there is no restriction on withdrawing cash from one’s own bank account, information about large withdrawals goes directly to the Income Tax Department. If your withdrawal crosses a certain limit, the bank deducts TDS on that amount under section 194N.
- Cash in property transactions (Rs 20,000): Making large payments in cash while buying or selling a house or land can be dangerous. Under Section 269SS, any advance or payment in cash of Rs 20,000 or more in a property transaction can attract a heavy penalty.
- Splitting the transaction: Many people break a large cash payment into smaller parts to avoid penalties. But, if all those payments are related to the same deal or program, then the Income Tax Department considers them as a single transaction. If such fraud is caught, a strict fine is imposed as per the rules.
