In today’s digital age, online transactions are becoming more common, but cash is still needed in various situations, especially in business or for those who aren’t comfortable with UPI.
Many people continue to keep cash at home for convenience.
However, if you’re storing large amounts of cash at home, it’s important to be aware of some rules to avoid problems with the Income Tax (IT) Department. Even a small mistake can lead to serious consequences.
1. Is There a Limit on Keeping Cash?
There’s no specific limit on how much cash you can keep at home according to Income Tax rules.
As long as you are financially capable, you can store any amount. However, you must be able to prove the source of the money.
If the Income Tax Department investigates, you will need to show where the money came from and provide your Income Tax Return (ITR) declaration.
2. What If You Can’t Explain the Source?
If you can’t explain where the money came from, it could lead to serious issues. The Income Tax Department may then review how much tax you’ve paid.
If you are found with undisclosed cash, they may take action, including imposing a hefty penalty. If the situation worsens, you could face legal consequences.
3. Possible Arrest in Certain Cases
In many cases, such as IT raids on politicians, officials, or businessmen, large sums of cash have been found.
If the person cannot explain the source of the cash, the Income Tax Department confiscates the money, imposes penalties, and in some cases, arrests the individual.
Therefore, it’s crucial to always have proof of the source of any cash you keep at home.
4. Other Important Rules Regarding Cash
While keeping cash is not illegal, the source and transparency of it are key.
Any cash you store should be traceable to legal sources, and it’s important to ensure that your income and taxes are in order to avoid scrutiny.
5. Section 194N of the Income Tax Act
Section 194N of the Income Tax Act mandates TDS (Tax Deducted at Source) for certain cash withdrawals.
If you haven’t filed an Income Tax Return (ITR) for the past 3 years and withdraw more than Rs 20 lakh in a financial year, a 2% TDS will be charged.
For withdrawals over Rs 1 crore, the TDS rate increases to 5%. However, individuals who have filed their ITR are allowed to withdraw up to Rs 1 crore in a year without TDS.
Any amount exceeding that will attract a 2% TDS charge.
Keeping large amounts of cash at home can attract attention from the authorities if it isn’t properly declared or the source isn’t verifiable.
Always ensure you maintain records of the origin of your cash to avoid unnecessary trouble with the Income Tax Department.
