Cash Transactions: Penalties for Excessive Transactions

 Cash Transactions are payments or transfers of amount that can be made using physical cash during a single transaction or over a specific period.

There is no limit on cash deposits. However, high-value transactions are reported under the Statement of Financial Transactions (SFT) provisions.


Cash Transaction Limits

Cash Deposits and Withdrawals

Savings or Joint Accounts: If cash deposits is Rs 10 lakh or more in a financial year, it needs to be reported. This limit also applies to fixed deposits

Current Accounts: When deposits or withdrawals is Rs 50 lakh or more in a financial year, it needs to be reported.

When no notice is issued?

Correct Income Declaration

If you properly declare your source of income correctly which you deposit as cash into your account through ITR filling evey year, then you will not face any issues.

Non-Taxable Income

If your income is not taxable or below the basic exemption limit of Rs 2.5 lakh.

When you can receive a notice?

If you under-report or misreport your income, then you will get notice and penalty will be 50-200%.

Restrictions on Cash Transactions

Receiving Cash Over Rs 2 Lakh

You cannot receive over Rs 2 lakh in cash-

  • from one person in a single day.
  • for a single transaction.
  • for transactions related to one event or occasion from one person.

Exceptions: This provision does not apply to government receipts, banking companies, or post offices.

Business Expenses

If you are running business than, expenses above 10,000 in single day in cash are not allowed.

Credit Card Bills

Paying credit card bills in cash over Rs 1 lakh is not allowed.

Cash Donations

Cash donations over Rs 2,000 are not allowed.

TDS on cash withdrawals

Withdrawals above INR 1 crore: 2% TDS is applicable.

Non-ITR Filers: For those who don’t file income tax returns –

  • 2% TDS applies to withdrawals over INR 20 lakh and
  • 5% over INR 1 crore.

Want To Know More About TDS on Cash Withdrawal Click Here

FAQs

Is there any limit for cash withdrawal from a bank?

Cash transactions limit is upto Rs. 2 Lakhs per day. Limit does not apply to withdrawals from banks and post offices, as it is clarified by the Central Board of Direct Taxes.

What happens if I withdraw 10 lakh cash from bank?

If you withdraw Rs 10 lakh or more in cash from a bank in one financial year, the bank is required to report this transaction to the IT department. This reporting applies to savings accounts and excludes current accounts and fixed deposits.

Can I deposit Rs 50 lakh in my savings account?

The cash deposit limit is Rs 10 lakh per financial year. When deposit is above 10 lakh amount, you may trigger a notification to the Income Tax department.


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