How much cash can you withdraw in a day? Learn the complete rules and limits, or you could face an Income Tax notice...
In today's times, when almost everything is being done through digital payments, many people still make cash transactions, whether for household expenses, gift-giving, or business purposes. But did you know that the Income Tax Department has set a daily cash transaction limit? Exceeding this limit could result in a tax notice and a hefty penalty.
Income Tax Department is Strict on Cash Transactions
The Indian government and the Income Tax Department are now strictly monitoring cash transactions. This is aimed at preventing black money and tax evasion. People often withdraw or deposit large sums of cash without knowing it, which could violate tax rules. Therefore, it is crucial to understand the legal limit for daily cash transactions.
What does Section 269ST of the Income Tax Act say?
According to Section 269ST of the Income Tax Act, a person can only make cash transactions of up to ₹2 lakh in a day. This means that giving or receiving more than ₹2 lakh in cash from a single person in a single day is considered a direct violation of the rules. This rule applies to all types of transactions, whether gifts, loans, or business payments. For example, if you give or receive ₹2 lakh in cash, the Income Tax Department can monitor this and issue a notice.
What is the penalty for violating this limit?
If you violate this rule, the Income Tax Department can impose a penalty equal to the amount you received in cash. For example, if you receive ₹2.5 lakh in cash from someone, you could be fined ₹2.5 lakh. This penalty is imposed under Section 271DA of the Income Tax Act. This fine is imposed on the person receiving it, not the one paying it.
Why was this rule enacted?
The government enacted this rule to prevent black money and tax evasion. Large cash amounts are difficult to trace, so the government requires all major transactions to be conducted through bank transfers, checks, or digital means to ensure traceability. Even if the transaction is personal, such as giving money to a relative or friend, if the amount exceeds ₹2 lakh, the Income Tax Department can investigate it.
How does the Income Tax Department monitor?
The Income Tax Department now monitors all transactions using an AI (Artificial Intelligence)-based data analysis system. If someone's savings account deposits or withdrawals exceed Rs 10 lakh in a year, or if their current account sees activity exceeding Rs 50 lakh, the system sends an alert.
Not only this, but if someone repeatedly attempts to evade the limit by entering cash of less than Rs 2 lakh, this can also be considered a "suspicious transaction" and investigated.
The Income Tax Department also monitors these transactions.
The Income Tax Department monitors not only bank cash deposits but also many other types of cash transactions, such as:
If you deposited more than Rs 10 lakh in cash in a year,
Paid a credit card bill of more than Rs 1 lakh in cash,
Bought or sold property worth Rs 30 lakh or more in cash,
Received a gift of more than Rs 50,000 in cash,
How to avoid an Income Tax notice?
If you want to avoid an Income Tax notice, keep a few simple things in mind:
Always conduct all major transactions through a bank or digital payment system.
Keep a record of every transaction, such as bills or receipts.
If it's necessary to give a gift or loan, do it in writing.
Most importantly, always be mindful of your cash limit.
In this era of Digital India, where everything is done via mobile, it's wise to avoid giving or receiving large sums of money in cash. The Income Tax Department is now closely monitoring all major cash transactions. Therefore, understand the rules, know the limits, and be cautious with cash transactions. Otherwise, even accidentally transferring or receiving excess cash could result in a notice and a hefty fine.
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