Avoid Tax Notices: Know the Legal Cash Receipt Limit Per Day

The Income Tax Department has intensified its scrutiny on large cash transactions, with taxpayers now facing the possibility of receiving notices for even minor lapses. Under Section 269ST of the Income Tax Act, receiving cash over ₹2 lakh is strictly prohibited in certain scenarios, and any violation could lead to hefty penalties.

When the ₹2 Lakh Cash Limit Applies

As per Section 269ST, individuals or entities are not permitted to receive ₹2 lakh or more in cash in the following cases:

• From a single person in a single day
• For a single transaction, even if received in parts
• For transactions related to a single occasion or event

This rule applies regardless of whether the payment is made in one go or split across multiple transactions. However, withdrawals from banks or post offices are exempt from this limit. Additionally, certain government-authorised entities (apart from banks) are not covered under this rule.

Relevant Sections Governing Cash Transactions

Several provisions in the Income Tax Act deal with various types of cash dealings:

• Sections 40A(3) and 43: Govern excessive cash payments
• Sections 269SS and 269ST: Address cash receipts above the prescribed limits
• Section 269T: Pertains to cash repayments of loans or deposits

The tax department keeps track of such transactions using financial intelligence data, and if someone is found to have accepted ₹5 lakh in cash in a day, for example, they may be subject to a significant penalty.

Taxpayer Advisory: Use Digital Channels

Experts advise taxpayers to avoid large cash dealings and opt for banking channels such as NEFT, RTGS, or UPI. Doing so ensures financial transparency and reduces the risk of receiving tax department notices or incurring fines.

In a time when the government is actively promoting digital payments, increased vigilance around cash transactions is expected. Staying informed about these legal boundaries is key to maintaining compliance and financial safety.

Conclusion 

The Income Tax Department has tightened rules around high-value cash transactions, with penalties applicable for receiving over ₹2 lakh in cash under Section 269ST. This limit applies across single transactions, daily totals, or related events.

Taxpayers are advised to use digital payment methods like NEFT or UPI to maintain compliance, avoid scrutiny, and ensure financial transparency in line with current regulations.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.