India's tax law does not ban cash, but it makes large cash transactions expensive and visible. Four sections do most of the work, and they are numbered the same way in the Income-tax Act 2025's mapping tables. If you run a shop, a clinic, a jeweller's or a contracting business, these limits decide how you take money.
The limits at a glance
| Rule | Limit | Applies to | Consequence |
|---|---|---|---|
| 269ST — receiving cash | ₹2 lakh or more, per person per day, per transaction, or per event/occasion | Anyone receiving | Penalty equal to the amount received (Sec 271DA) |
| 40A(3) — paying cash (business expense) | Above ₹10,000 per person per day (₹35,000 for transporters) | Businesses claiming the expense | Expense disallowed in full |
| 269SS — accepting loans/deposits/advances for property in cash | ₹20,000 or more | Anyone | Penalty = amount (Sec 271D) |
| 269T — repaying loans/deposits in cash | ₹20,000 or more | Anyone | Penalty = amount (Sec 271E) |
| 194N — TDS on cash withdrawals | Above ₹1 crore/year from a bank (₹20 lakh for non-filers) | Account holder | 2% TDS (5% above ₹1 cr for non-filers) |
| Cash sales reporting (SFT/AIS) | Cash receipts ≥ ₹2 lakh for sale of goods/services are reported by the seller in Form 61A | Sellers | Visible in buyer's AIS; mismatch → notice |
| Cash deposits in bank | ≥ ₹10 lakh/year in savings; ≥ ₹50 lakh in current account | Banks report | AIS entry; explainable if books match |
269ST in practice
A customer wants to buy a ₹2.5 lakh sofa set in cash. You cannot accept it — not as ₹2.5 lakh, and not as two instalments of ₹1.25 lakh for the same purchase ("in respect of a single transaction"). Take UPI/card/cheque for anything at or above ₹2 lakh. A ₹1,99,999 cash sale is legal but reportable if ₹2 lakh is reached across the transaction.
"Per event" also matters: a caterer cannot take ₹3 lakh in cash for one wedding as three ₹1 lakh payments on different days.
The penalty is on the receiver, and it is 100%. Print a line on your rate card: "Cash accepted up to ₹1,99,999 per bill; UPI/card for higher amounts." The UPI standee makes the alternative painless.
40A(3) in practice
You pay a supplier ₹15,000 in cash for stock. The whole ₹15,000 is disallowed as an expense — your taxable profit rises by ₹15,000. Split payments to the same person on the same day are aggregated. Exceptions (Rule 6DD): payments where banking isn't available, to farmers for produce, on bank holidays with proof, etc. Pay by UPI/NEFT; keep the payment receipt with the transaction ID as evidence.
Capital expenditure paid in cash above ₹10,000 is not eligible for depreciation either (Sec 43(1)).
269SS / 269T: loans and property advances
Taking ₹50,000 from a friend in cash as a loan, or accepting a ₹30,000 cash advance for a property sale, attracts a penalty equal to the amount. Use bank transfers for all loans between people and businesses; repayment likewise. Small loans below ₹20,000 in cash are fine.
How cash gets noticed
- Banks report large deposits; sellers report ₹2 lakh+ cash sales; the AIS shows it to the customer and the department.
- GST data (sales) is matched to bank credits. Cash sales must still be invoiced — the invoice generator marks payment mode.
- Demonetisation-era logic still applies: unexplained cash credits are taxed at 60% + surcharge under Sec 115BBE.
- Since 2025 the department's analytics cross-checks IMS purchases, bank data and AIS at scale.
Sensible cash policy for a small business
- Accept cash freely up to ₹1,99,999 per transaction; invoice every rupee.
- Pay suppliers and salaries above ₹10,000 digitally; wages under ₹10,000/day in cash are allowed but slips are mandatory.
- Deposit cash regularly with a deposit slip narration "cash sales"; keep the daily sales register.
- Never accept or give loans in cash above ₹20,000.
- If turnover is under ₹2 crore, keeping cash receipts ≤ 5% qualifies you for the ₹3 crore presumptive limit under 44AD.
FAQ
Can I accept ₹2 lakh in cash from one customer?
No — the limit is ₹2 lakh or more; ₹1,99,999 is the maximum per transaction/day/event.
Is the ₹10,000 limit per bill or per day?
Per person per day, aggregated. Two ₹6,000 cash payments to the same supplier on one day breach it.
Does 269ST apply to cash withdrawals from my own bank?
No. It applies to receipts from another person. Bank withdrawals above ₹1 crore attract TDS under 194N instead.
What about cash gifts at weddings?
Gifts on the occasion of your own marriage are tax-exempt, but 269ST still applies to cash of ₹2 lakh or more from a single person for a single occasion.