Income Tax Department can send notice for cash transactions of more than ₹20000, See details

Cash Transactions Rule: Using cash can also land you in trouble. According to Income Tax, if you transact more than Rs 20,000 in cash, you may have to pay a fine.

Cash Transactions Rule: If you transact more than 20 thousand rupees in cash, then you can get into big trouble. Income tax can tighten its grip on you. According to section 271DD of the Income Tax Act, 1961, if you transact more than 20,000 rupees in cash, then you can be fined as much as you have taken or given in cash. According to Economic Times, the Income Tax Department has said in a brochure not to do cash transactions.

What happens if a friend lends you money in cash?

If a friend of yours gives you a cash loan of Rs 30,000, even then the tax law will apply. According to experts, section 269SS of the Income Tax Act, 1961 also applies to private transactions between friends and relatives.

According to this section, no person can take a loan, deposit etc. of Rs 20,000 or more in cash. It can only be taken through account payee cheque, account payee bank draft or electronic mode like NEFT, RTGS, UPI etc. If someone takes a cash loan of Rs 20,000 or Rs 30,000, then section 269SS is violated. A penalty is imposed on this under section 271D, which is equal to the loan amount. That is, if 30 thousand is given in cash, then a penalty of only 30 thousand will be imposed.

What are the income tax rules related to cash?

1. Section 269SS: Taking/giving loans, deposits and certain amounts in cash

No person can take/give an amount of more than Rs 20,000 in cash for loan, deposit or any other purpose. This amount will also include the cash which was taken earlier and has not been repaid yet.

These rules do not apply to

  • Any bank, post office savings bank or co-operative bank (but not all co-operative societies, whether engaged in banking or allied activities or not).
  • Any corporation formed under a Central, State or Provincial Act.
  • Any Government company referred to in section 2(45) of the Companies Act, 2013.
  • Any notified institution, association or body (or group of institutions, associations or bodies).
  • These rules also do not apply if both the giver and the receiver are earning their income from agricultural activities and neither of them has income chargeable to tax under the Income Tax Act, 1961.

2. Section 269ST: Acceptance of other amounts in cash

No person, whether a tax payer or non-tax payer, can accept in cash an amount of Rs 2 lakh or more. This amount means any amount collected from any one person in a day, in the aggregate, in a single transaction or from any one person in a single event or occasion.

These rules do not apply to

  • Any amount collected by the government or any bank, post office savings bank or any co-operative bank (but not all co-operative societies, whether engaged in banking or allied activities or not).
  • Transactions specified in section 269SS.
  • Any person or group of persons or receipts as may be notified separately.

Supreme Court’s opinion on transactions in cash

Chartered Accountant Suresh Surana says that in April 2025, the Supreme Court said that if a person transacts more than Rs 2 lakh in cash, then it is a violation of section 269ST of the Income Tax Act. And he will be fined under section 271DA.

Although this rule mostly applies to the loan taker, but the loan giver will also have to tell where he earned this cash from. The court has said that to prevent more transactions in cash, it is necessary that everyone follows the rules. If there is a cash transaction of more than Rs 2 lakh, then the court will have to inform the Income Tax Department so that they can investigate.

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