Cash Transaction Limits for FY 2025–26: What You Must Know to Avoid Penalties

As India moves toward a more transparent and digital economy, the Income Tax Department has significantly increased its scrutiny of high-value cash transactions. Whether you’re an individual, business owner, or professional, staying compliant with these rules is essential to avoid heavy penalties and legal consequences.

This article outlines the latest cash transaction limits applicable for Financial Year 2025–26 and explains the penalties for non-compliance.

Cash Receipt Limit – ₹2,00,000 – Section 269ST & Section 185

You are prohibited from receiving ₹2 lakh or more in cash:

• From a single person in one day
• In a single transaction
• For transactions related to a single occasion or event

Splitting the amount between people constitutes a violation.

Example: If you sell gold worth ₹1.8 lakh, you cannot accept ₹90,000 from the buyer and ₹90,000 from his relative.

Daily Limit – ₹1,00,000 from One Person – Section 186

Even if the ₹2 lakh threshold is not breached, accepting ₹1 lakh or more in cash from a single person in one day, across multiple transactions, is prohibited.

• Cash Loans and Deposits – Maximum ₹20,000 – Sections 269SS & 269T
• You cannot accept or repay any loan or deposit exceeding ₹20,000 in cash.
• This applies to individuals, businesses, and even close relatives.

Penalty: Equal to the amount received or repaid in cash.

Business Expenses Paid in Cash – Section 40A(3)

Businesses cannot claim tax deductions for cash expenses exceeding:

• ₹10,000 per day per person
• ₹35,000 per day in case of payments to transporters

Expenses above these limits are disallowed, increasing taxable income.

TDS on Cash Withdrawals – Section 194N

Cash withdrawals from bank accounts attract Tax Deducted at Source (TDS) as follows:

• TDS @ 2% if withdrawals exceed ₹1 crore in a financial year
• TDS @ 5% if you haven’t filed ITRs for the last 3 years and withdrawals exceed ₹20 lakh

High-Value Cash Transactions That Are Monitored

All such transactions are linked to your PAN and are reported to the Income Tax Department.

Consequences of Violating Cash Transaction Limits

Failure to comply can result in:

• Scrutiny or notices from the Income Tax Department
• Taxation @ 78% on unexplained cash under Section 69A
• Penalty @ 100% of amount involved under Sections 271DA, 271D, and 271E

Compliance Checklist

• Use banking channels like NEFT, RTGS, IMPS, UPI, or cheques
• Avoid cash payments above prescribed limits
• Maintain proper documentation for all transactions
• File your ITRs on time to avoid higher TDS

Conclusion

In FY 2025–26, adhering to cash transaction limits is more important than ever. Non-compliance not only invites scrutiny but can also lead to significant penalties. By adopting digital payment methods and staying within legal limits, you ensure financial integrity and avoid tax troubles.

About the Author

• Shruthi Keerthi