Will Keeping Cash At Home Attract 84% Penalty Under New Income Tax Rules? CA Explains
Increasing scrutiny on cash transactions has sparked debate on whether undisclosed money kept at home could attract an 84% tax penalty.
With the government tightening income tax rules on cash dealings, unexplained high-value transactions can attract hefty penalties.
In a recent post on LinkedIn, investment banker CA Sarthak Ahuja explained why it’s important for all to keep track of certain cash transactions.
As the government has tightened the measures to track undisclosed money, keeping cash at home beyond permissible limits can lead to punitive tax. If the Income Tax Department uncovers cash at your residence for which you cannot give a valid explanation, hefty penalties may follow, according to the Chartered Accountant.
“The New Income Tax regulations will impose 84% tax on all the cash that they find lying at your place,” Ahuja said in his LinkedIn post.
"First, if you have unexplained cash at your home that the Income Tax Department finds, it will attract an 84% penalty in total, including surcharges, cess and penalty...But how do you think the Income Tax Department shall find out?” he added.
The Income Tax Department can track cash transactions through your banks, according to Ahuja. For instance, banks are required to inform the I-T Department about withdrawals of more than Rs 10 lakh in a year from any savings account.
“If you withdraw more than Rs 10 Lakh as cash from your savings account in a year... the bank will report it to the tax department...If you withdraw more than Rs 20 lakhs, the bank will deduct TDS. And if the tax department feels there is something shady, they can launch a search and seizure against you,” the CA added.
Authorities are also closely watching cash transactions involved in property deals.
“If you sell any immovable property and receive cash of more than Rs 20,000 against it, a 100% penalty will be imposed on such cash receipt. If you receive more than Rs 2 lakh in cash from one customer in a day, then a 100% penalty will be imposed on the entire amount,” he said.
Borrowing money in cash from friends or family is still widespread, although the law does not permit it.
“If you take any loan from someone in cash, you will have to pay a 100% penalty on that amount, as no loans are allowed to be taken in cash,” Ahuja said.
The technology-driven modern government infrastructure ensures that banks and payment services constantly share information with tax officials, making it easier to flag discrepancies between cash transactions and declared earnings.
“Please be mindful, the government can literally catch anyone today with the amount of information they have on your transactions,” the CA concluded.
