Unexplained Cash at Home? Know About the 84% Tax Risk

India’s income tax rules on cash transactions are becoming stricter, causing confusion among individuals and businesses about permissible cash holdings. CA Sarthak Ahuja, an investment banker, recently highlighted these changes, explaining how unexplained cash can trigger significant penalties. The government aims to curb unaccounted money and enhance transparency, making it essential for everyone to understand the rules.

Unexplained Cash Can Attract Up to 84% Tax.

According to Ahuja, if the Income Tax Department finds unexplained cash at your home, it can attract up to 84% tax, including basic tax, surcharge, cess, and penalty. Essentially, unexplained cash can be taxed almost entirely.

Tracking Cash Withdrawals

Banks now report large cash withdrawals. For example, withdrawing more than Rs 10 lakh from a savings account in a year is reported to the tax department, while withdrawals above Rs 20 lakh are subject to TDS. Suspicious transactions can trigger searches or inquiries.

Cash in Property Deals and Large Transactions

Cash payments in property deals are closely monitored. Receiving more than Rs 20,000 in cash can attract a 100% penalty. Similarly, businesses or individuals accepting more than Rs 2 lakh in cash from a single customer are liable for the entire amount as a penalty.

Cash Loans Are Not Allowed

Taking cash loans from friends, relatives, or others is prohibited. Any such loan can result in a 100% penalty.

Why Compliance Matters

With banks, payment apps, and financial institutions sharing data with authorities, unexplained cash is easy to detect. Awareness and compliance are essential to avoid heavy penalties.

Conclusion

The new income tax rules make transparency in cash dealings crucial. Unexplained or large cash amounts can attract penalties of 84%–100%, highlighting the need for careful financial management.