The talk about India’s income tax rules is getting intense. Everybody is asking if the government can really take away almost all your cash. The short answer is: Yes, they can. Unexplained cash found during a search can attract a tax and penalty that totals up to 84%.1
Also Read | File Online Police Complaint: Universal Step-by-Step India Guide.
Cash at Home: Why Unexplained Money Can Cost You 84%
India’s rules for cash dealings are much tighter now. The government is strengthening laws to curb unaccounted money.2 Let’s be real. If the Income Tax Department finds cash at your place, and you cannot explain where it came from, the penalty is extreme.3
CA Sarthak Ahuja, an investment banker, recently explained the breakdown:
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The total tax and penalty combined is 84%.4
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This 84% covers the base tax, plus a surcharge, a cess, and a hefty penalty.5
In simple terms, nearly every rupee of unaccounted cash can be taken by the department. It almost completely wipes out the amount they find.
How Officials Find Out
The government’s tracking systems are far more advanced now. Banks and financial institutions share data with the tax department automatically. This makes it easy to spot unusual cash movements that do not match a person’s declared income.
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Bank Reporting: If you withdraw more than ₹10 lakh as cash from your savings account in a year, the bank must report it to the I-T Department.
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TDS Deduction: If you withdraw over ₹20 lakh in a year, the bank will also deduct TDS (Tax Deducted at Source).6
If officials sense anything suspicious based on this data, a search or inquiry follows.
Cash Penalties Are Heavy, Or Nothing
The strict rules apply to receiving cash, giving cash, and property deals. The penalty is often 100% of the transaction value.
| Transaction Type | Cash Limit | Penalty | The Kicker |
| Property Sale | Receiving more than ₹20,000 in cash. | 100% penalty on the entire cash amount. | If you receive ₹50,000 in cash, you pay ₹50,000 as a penalty. |
| Cash Receipts | Receiving more than ₹2 lakh in cash from one customer in a day. | 100% penalty on the entire amount received. | This applies whether you are selling goods or services. |
| Cash Loans | Taking any loan from someone in cash. | 100% penalty on the loan amount. | Under the law, all loans must be transacted through banking channels. |
As Ahuja advised, “Please be mindful, the government can literally catch anyone today with the amount of information they have on your transactions.” It is vital to use banking channels for all large dealings.
Also Read | File Online Police Complaint: Universal Step-by-Step India Guide.
