Every common and special man in India sometimes comes the question that how much cash is legal to keep in the house? Especially when a large amount of cash is in cash for some reason-whether it is the income of business, money from the sale of land or property or any other source. But what does the Income Tax Department say on this subject? Is there any fixed limit to keep cash in the house? Can there be a fine or jail for this?
Let us know in detail the rules, risk, restrictions and necessary precautions to keep cash as per income tax rules.
Is there a limit to keep cash in the house?
First of all, it is important to know that no fixed limit has been set in the Income Tax Act to keep cash in the house. That is, you can keep as much cash in your house – but with some conditions.
If you have a justification, that is, you can prove from which source this money has come and you have paid tax on it, then you can keep the biggest amount with you.
What is important to take care of while keeping cash at home?
1. Source of Income should be clear
If your house is raided by an investigating agency or Income Tax Department and cash is recovered there, then you will be asked a source of that money. For example:
Is this part of your salary?
Is it from the sale of a property?
Is this earning from business?
Have you paid tax on this?
If you are unable to tell the source of this amount, then this amount will be considered undiscLosed income.
2. ITR means income tax return is necessary
Cash money kept at home should be announced in ITR. That is, you have mentioned this in your income tax return, only then it will be considered legally valid. Otherwise, the Income Tax Department can consider it an benami property and take legal action against you.
3. What will happen if the money is not proved in the investigation?
If you are unable to tell the Income Tax Department where the money came from:
That amount can be confiscated.
You can be fined heavy (in many cases a fine of 60-75% of the amount has been fined).
Even the arrest can come if it is proved that you have deliberately tax evasion.
Bank transaction and PAN card needed
There is not only a matter of keeping cash in the house, the government is closely monitored on transactions from the bank. So also know some important rules:
1. PAN compulsory on deposit or withdrawal of more than ₹ 50,000
If you deposit or extract more than ₹ 50,000 cash in the bank at a time, then it is mandatory for you to show PAN Card. Without PAN number, such a large amount of cash will be considered a violation of the transaction rules.
2. Strict rules for those who do not fill ITR for 3 years
If you have not filed ITR for the last three years, and you withdraw more than ₹ 20 lakh cash from bank in a financial year, then you:
2% TDS (Tax deduction at source) will have to be paid at an amount above ₹ 20 lakh.
If there is more than ₹ 1 crore cash transaction, then this TDS can increase by 5%.
But if you file ITR regularly, you can get some relief from this rule.
Take care of these rules in cash transactions:
1. Do not take more than ₹ 2 lakh in cash
According to Section Section 269st of the Income Tax Act, no person can transact more than ₹ 2 lakh in cash from a person in a day. A fine can be imposed as much as ₹ 2 lakh for violating it.
2. Cash gift on marriage or other occasions
If someone has given you a cash gift of more than ₹ 50,000 on the occasion of a wedding or function, then it also has to be shown in ITR. If you are not able to prove where the gift came from, then it can also be considered taxable income.
Who should take more care in keeping cash?
Businessman: Those who have income in cash, should keep a complete record of every cash transaction.
Property Dealer: Large cash runs in the sale of land and property, which can become the subject of investigation.
Jewelers or other traders: Those who often have large cash amount should keep the right bookkeeping.
How is the Income Tax Department eye?
In today’s digital age, the Income Tax Department has many ways to find out:
A large amount of money has suddenly been deposited in someone’s account.
No person fills ITR, yet he repeatedly withdraws large cash withdrawals from the bank.
Red flag transactions are tracked and followed by investigation.
Therefore, the Income Tax Department can start an investigation without any notice, if it finds it somewhat suspicious.
So how much cash is kept at home?
Although there is no direct limit, yet financial advisors and tax experts believe:
Keep cash according to your requirement and risk capacity.
By keeping an amount above ₹ 2 lakh, you should keep strong documents and source proof ready.
Always try to earn most of your earnings through banking mediums, so that the record of transactions remains.
Conclusions: Surprise is rescue
It is not a crime to keep cash in the house, but its accountability must be fixed. If you follow tax rules, fill ITR and your income is valid, then you do not need to be afraid. But if you keep unannounced cash and cannot tell its source at any time, then you can get caught in legal crisis.
