New Cash Holding Rule: Income Tax Department Warns Citizens to Declare Source of Cash at Home

In a country where digital payments are gaining popularity, cash still holds significant value for many. Whether it’s for daily expenses, business transactions, or for those unfamiliar with UPI and online payments, keeping cash at home is still common practice. But if you’re someone who keeps large amounts of cash in your house, you need to be cautious.

The Income Tax Department has updated its compliance stance on cash holdings at home. While there’s no exact cap on how much cash a person can store, failing to provide the source of the money can lead to serious consequences, including penalties, seizure, or even arrest.

💼 Can You Legally Keep Cash at Home?

Yes, as per current income tax laws, there is no fixed limit on the amount of cash an individual can keep at home. If you are financially sound and the money is earned legally, there is no issue. However, you must be able to explain the source of the cash if asked by tax authorities or investigative agencies.

If you are ever subjected to an Income Tax raid, officers can ask you to justify the cash amount in your possession. In such situations, you’ll need to show documentation, including bank statements, ITR filings, business records, or any other proof that can validate your claim.

❌ No Source? Expect Trouble

If you're unable to produce a legitimate source of the cash, the situation becomes risky. In such cases:

• The cash can be confiscated.

• A penalty may be imposed.

• You may be subject to a tax investigation.

• In extreme cases involving large sums or suspicious activity, legal action or arrest may follow.

This is often seen during IT raids on corrupt officials or tax-evading businessmen, where lakhs or crores of rupees in unaccounted cash are found.

📜 Section 194N and PAN Rule

Several other regulations also apply in the context of cash handling:

✅ PAN Requirement

According to the Central Board of Direct Taxes (CBDT):

• If you deposit or withdraw over ₹50,000 in a single transaction at a bank, you must provide your PAN card.

📉 Section 194N – TDS on Large Cash Withdrawals

If an individual has not filed ITR for the last 3 years, the following TDS (Tax Deducted at Source) rules apply under Section 194N:

• 2% TDS on withdrawals over ₹20 lakh in a financial year.

• 5% TDS on withdrawals exceeding ₹1 crore.

For regular taxpayers who file ITR:

• They can withdraw up to ₹1 crore without TDS.

• If the withdrawal exceeds ₹1 crore, 2% TDS applies.

🔍 Why the Rule Matters Now

With increasing efforts to crack down on black money, the government is closely monitoring high-cash activities. Even if cash transactions are not illegal, lack of documentation or clarity can attract scrutiny from the Income Tax Department.

If you are a businessperson or a household with high cash requirements, it’s wise to:

• Maintain receipts and transaction records.

• Ensure ITR filings are up to date.

• Avoid making large cash deals without proper invoices.

✅ Conclusion

Keeping cash at home is not a crime, but transparency is crucial. The Income Tax Department is not targeting citizens unnecessarily, but it is becoming stricter about unexplained wealth. To avoid trouble, make sure any cash in your possession is backed by legal income sources and well-documented.

In today's digital age, clarity over your finances isn't just good practice — it could save you from heavy penalties or legal action.