Cash Transaction Limits from 2026 (FY 2025–26 Compliance): TDS on Cash Withdrawal, ₹20,000 Cash Loan/Property Rules, ₹2,00,000 Cash Sale Limit, SFT Reporting ₹10 Lakh/₹50 Lakh, and 100% Penalty Risks
Introduction –
Cash transactions continue to be one of the most sensitive areas under the Income-tax compliance framework. The practical reality is that common taxpayers do not have the luxury of ignoring these rules. If cash is held without explanation or cash deals are structured outside the permitted limits, the Income Tax Department can initiate verification, issue notices, and in serious cases, impose harsh consequences.
This discussion focuses on the cash transaction limits that are stated to apply going into 2026, especially the areas where people typically make mistakes: cash withdrawal from banks, cash at home, cash loans and repayments, rental security deposits, property transactions, day-to-day business cash receipts and payments, disallowance of depreciation on capital assets bought in cash, and restriction of deductions where payments are made in cash. It also explains how the department comes to know about high cash activity through SFT reporting and enforcement actions.
Main Discussion –
1) TDS on cash withdrawal from banks
When you withdraw cash from your bank, the law can trigger TDS based on your filing status and total cash withdrawal in a financial year.
- If you have filed ITR for the last 3 years and you withdraw more than ₹1 crore in a financial year, the bank will deduct 2% TDS.
- If you have not filed ITR, the TDS structure becomes stricter: for cash withdrawal between ₹20 lakh and ₹1 crore, TDS is 2%, and once you cross ₹1 crore, TDS becomes 5%.
A practical point highlighted is that this TDS is not “gone”. You can claim it in your ITR, but for that you must file the return and claim the credit in the next year.
2) How much cash can be kept at home
The Income-tax Act does not prescribe a specific number for how much cash you can keep at home. The compliance test is different: whatever cash you keep must be explainable. If the department finds unexplained cash, the exposure can be extremely heavy. The discussion indicates that tax plus penalty can go up to 84% in such cases. Therefore, the focus is not “how much cash”, but “can you explain it”.
3) Cash loan, cash security deposit, and cash repayment: ₹20,000 is a danger line
One of the strongest cash limits discussed is around loans and deposits. If you give a loan in cash exceeding ₹20,000, the consequence stated is a 100% penalty. The discussion gives a practical advisory: even if you are giving money to family or friends, do not do it in cash; use banking transactions.
The same ₹20,000 restriction also applies in related situations:
- A landlord cannot accept a security deposit in cash exceeding ₹20,000. If accepted beyond this, the discussion states 100% penalty provisions can apply.
- When repaying a loan or returning a security deposit, you also cannot repay more than ₹20,000 in cash. Repayment beyond this limit in cash is not permitted.
4) Property transactions: strict approach on cash
Property transactions are another area where cash invites serious risk. The discussion states that cash transactions in relation to property above ₹20,000 are not allowed and can attract 100% penalty exposure. Practically, property consideration should be routed through banking channels so that the trail is clean.
5) Business cash receipt limit and cash expense limits
For business persons, the discussion highlights two critical limits:
- You cannot make cash sales to a person exceeding ₹2,00,000 in a day.
- For expenses, you cannot pay a person more than ₹10,000 in cash in one day. If you are paying a transporter, the daily cash limit increases to ₹35,000.
These limits impact billing, collections, petty cash usage, and vendor payments. They require internal discipline because “one day, one person” is the measurement point.
6) Capital assets bought in cash: depreciation risk
If you purchase capital assets in cash—such as buying multiple laptops/computers and paying cash—then depreciation may not be allowed on those assets. The practical compliance takeaway is simple: capital expenditure should be made through banking channels if you want the depreciation benefit to remain protected.
7) Cash payments block deductions: 80G and 80D
Two deduction-linked restrictions are clearly stated:
- Donation deduction under Section 80G is not available if donation is paid in cash above ₹2,000.
- Health insurance deduction under Section 80D is not available if the premium is paid in cash.
Practical Impact / Expert View –
Many taxpayers assume the department cannot track cash. The discussion explains that this is incorrect. Banks, financial institutions, registrars, etc. report high-value cash activity through SFT reporting. For cash deposit and withdrawal reporting:
- In a savings account, cash deposit/withdrawal above ₹10 lakh in a financial year can be reported.
- In a current account, the threshold is ₹50 lakh in a financial year.
Apart from reporting, the discussion also mentions detection through search, seizure, and raids. Therefore, the compliance strategy should be preventive: avoid cash loans, avoid property cash components, control business cash receipts and payments within limits, use banking channels wherever possible, and keep cash on hand explainable with supporting records.
Conclusion – key takeaways –
- Cash withdrawal TDS: 2% above ₹1 crore for ITR filers; 2% (₹20 lakh–₹1 crore) and 5% (above ₹1 crore) for non-filers.
- Cash at home has no fixed limit, but must be explainable; unexplained cash may face exposure up to 84%.
- Cash loan/security deposit/repayment above ₹20,000 can trigger 100% penalty exposure.
- Property cash transactions above ₹20,000 are high-risk with 100% penalty provisions stated.
- Business: cash sale limit ₹2,00,000 per person per day; cash expense limit ₹10,000 per person per day (₹35,000 for transporters).
- Capital assets bought in cash can lose depreciation benefit.
- Deductions blocked by cash payments: 80G above ₹2,000 and 80D health insurance in cash.
- SFT reporting thresholds: ₹10 lakh (savings) and ₹50 lakh (current) for annual cash deposit/withdrawal reporting.
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