In Case You Missed It: New Rules for Cash Deposits

By | July 19, 2022

It is compulsory for you to provide both your PAN details and Aadhaar card if you deposit more than Rs. 20 lakhs in a year. Read on for the details.

Smart Ways To Make The Best Of Surplus Cash

In May 2022, the Central Board of Direct Taxes (CTBT) rolled out a new set of rules and regulations pertaining to cash deposits. Under the new rules, if you’re looking to deposit more than Rs. 20 lakhs per year, you will need to furnish your PAN and Aadhaar details.

Earlier, you could deposit cash up to Rs. 50,000 per day without furnishing such details and the Income Tax department had not defined an annual limit.

However, under the latest regulations, large cash deposits and withdrawals in a single year (in a single bank or across multiple banks) would need PAN and Aadhaar details in order to create trackable information. The move is a bid to rein in illegal as well as unaccounted cash transactions.

Additional Reading: How to Use a Cash Deposit Machine

What the New Rules State

In its notice issued in May 2022, the CTBT said that “Every person shall, at the time of entering into a transaction specified in column (2) of the Table below, quote his permanent account number or Aadhaar number, as the case may be, in documents pertaining to such transaction, and every person specified in column (3) of the said Table, who receives such document, shall ensure that the said number has been duly quoted and authenticated.”

The Penalty

Be prepared to cough up a hefty penalty of up to 100% of the amount paid or received if you pay or receive cash above the stipulated limits.

If You Do Not Have a PAN

You would need to apply for a PAN at least seven days prior to dealing with any cash transaction of more than Rs. 50,000 per day or above Rs. 20 lakhs per financial year.

In a bid to curb black money, the government has also set a number of limits on cash transactions. Here’s a list of cash transactions that could have some serious consequences:

Cash Transactions Above Rs. 2 Lakhs

As per India’s income tax laws, cash transactions more than Rs. 2 lakhs for any reason are prohibited. For e.g. if you are buying jewellery worth Rs. 2.5 lakhs in a single transaction, you would need to make that payment using Credit Card, Debit Card, bank transfer or cheque.

Cash Gifts Above Rs. 2 Lakhs

The Rs. 2 lakhs limit applies even if you are receiving or gifting cash to family members and friends. As per the rules, a person cannot accept over Rs. 2 lakhs in cash in a single day, not even from close relatives. You cannot accept even a cash gift of over Rs. 2 lakhs from a single giver on a single occasion. If you do accept cash of more than Rs. 2 lakhs, you could face a penalty equal to the amount received.

Additional Reading: Save Tax Through Gifts. This is How It Works

Cash Payments for Health Insurance

Paying your health insurance premium in cash would render you ineligible for the Section 80D deduction. You would need to pay your insurance through the banking system (netbanking, cheque, UPI, etc.) in order to claim the Section 80D deduction.

Cash Loans from Friends/Financial Institutions

In case of availing a cash loan from a financial institution or a friend, the total amount cannot exceed Rs. 20,000. This would also apply to debt repayment i.e. repaying a loan of Rs. 20,000 or more would need to be done through the banking system and not in cash.

Cash Limit for Property Transactions

A maximum cash limit of Rs. 20,000 is allowed for property transactions. This limit would be applicable even if the seller is accepting an advance.

Cash Expenditure Limit for the Self-Employed

Self-employed individuals cannot claim any expenditure over Rs. 10,000 if it is paid in cash to a single person in a single day. However, payments made to a transporter are limited to Rs. 35,000.

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