Cash Transaction Limits Under Income Tax

India's tax law actively discourages large cash dealings — and the penalties for crossing the lines are steep. Whether you run a shop or a services firm, these cash rules matter.

Limits on receiving cash

There are restrictions on accepting large amounts of cash in a single transaction or from one person in a day. Breaching them can attract a penalty equal to the amount received — a harsh consequence.

Limits on cash expenses

Business expenses paid in cash above a threshold to a person in a day can be disallowed as a deduction — meaning you pay tax on money you actually spent.

Practical rules to follow

• Prefer bank/digital channels for anything sizeable.
• Don't accept large cash sums against a single sale or from one customer in a day.
• Keep cash expenses small and well-documented.

The safe habit is simple: route significant money through the banking system. It protects your deductions, keeps you off the radar, and makes your books cleaner.

This article is for general information based on rules current at the time of writing and is not professional advice. Rules change — confirm specifics with a GovYapar expert before acting.