The government has tightened cash transaction rules in order to curb black money and unaccounted dealings. What may look like a simple cash deal with a friend or relative could now land you in trouble. Understanding these new rules is essential so you don’t end up paying heavy penalties.
Cash Loans Above ₹20,000
Under Section 269SS of the Income Tax Act, cash loans above ₹20,000 are strictly prohibited. If you borrow or lend more than this amount in cash, you may be penalized with a fine equal to 100% of the loan amount. For example, if your friend helps you with ₹55,000 in cash, instead of relief, you could face an additional fine of ₹55,000 from the government.
It’s not just about loans. Receiving over ₹1.9 lakh in cash from anyone in a single day can also attract the same penalty. This is to ensure all large transactions are traceable and routed through banking channels. Repaying a loan in cash also comes under the scanner. If you pay back more than ₹25,000 in cash for a loan, the penalty remains the same 100% of the cash amount paid.
Even donations are included in these restrictions. If you donate above ₹1,999 in cash, you will lose all associated income tax benefits. This means if you want to claim tax deductions on donations, they must be made via digital payments, cheque, or bank transfer. The clear message from the government is that it wants to tighten rules around cash to curb black money and cash-based transactions. These steps are aimed at promoting digital payments and ensuring transparency in financial dealings.
To avoid penalties, it is always safer to use UPI, bank transfers (NEFT/RTGS/IMPS), or cheques for large payments. These methods not only protect you from fines but also ensure proper documentation of your transactions.
The biggest takeaway is simple: avoid cash for big amounts. One mistake can cost you double. Using formal banking channels is not just safe but also keeps you on the right side of the law.
