Cash, property, bank deposits: Key Income Tax limits to avoid penalties | Personal Finance

Receiving Rs 2 lakh or more in cash, buying a property worth Rs 50 lakh or above, or making large cash deposits into your bank account can put your transactions on the Income Tax Department’s radar. Such transactions are subject to reporting requirements or tax rules that people should understand to avoid penalties, notices or compliance issues.

 

Several provisions under the Income Tax Act and the Statement of Financial Transactions framework require banks, registrars and other institutions to report specified high-value transactions to the tax department. These details are reflected in a taxpayer’s Annual Information Statement (AIS), making it easier for the department to match reported income with financial transactions.

 
 

Cash transactions face the strictest limits

 

 

Under Section 269ST, a person cannot receive Rs 2 lakh or more in cash from a single person in one day, for a single transaction, or for transactions relating to one event or occasion. A violation can attract a penalty equal to the amount received under Section 271DA.

 

Separate provisions govern cash loans and deposits. Under Section 269SS, cash loans, deposits or advances of Rs 20,000 or more relating to the transfer of immovable property cannot be accepted in cash. Likewise, Section 269T prohibits repayment of loans or deposits of Rs 20,000 or more in cash. Violations may attract penalties equal to the amount involved under Sections 271D and 271E, respectively.

 

These restrictions do not apply to transactions involving the Central or State governments, banks and certain government-notified institutions. For example, taking or repaying a loan with a bank is not covered by these provisions.

 

Property deals come with tax reporting obligations

 

Property transactions above specified thresholds also attract tax compliance requirements.

 

If the sale consideration or the property’s stamp duty value is Rs 50 lakh or more, the buyer must deduct 1 per cent tax deducted at source (TDS) under Section 194-IA before making payment to the seller.

 

Separately, under new Income Tax Rules, 2026, property transactions of Rs 45 lakh or more are required to be reported by Registrars and Sub-Registrars under the Statement of Financial Transactions framework. Depending on the nature and value of the transaction, quoting a PAN may also be mandatory.

 

Large cash deposits are reported

Banks are required to report certain high-value cash transactions to the Income Tax Department.

 

The key thresholds include:

 

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  Cash deposits aggregating Rs 10 lakh or more in a financial year in one or more savings accounts.
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  Cash deposits or withdrawals aggregating Rs 50 lakh or more in current accounts during a financial year.

 

These transactions are reported through Form 61A under the Statement of Financial Transactions. While reporting does not automatically result in tax action, unexplained deposits or mismatches with declared income may invite scrutiny.

 

Other transactions that may come under the tax department’s lens

 

Apart from cash and property transactions, several other high-value financial activities are subject to reporting or compliance requirements.

 

These include:

 

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  Credit card payments made in cash of Rs 1 lakh or more.
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  Aggregate credit card payments of Rs 10 lakh or more in a financial year.
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  Foreign travel expenditure exceeding Rs 2 lakh in specified cases.
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  Purchase of motor vehicles above prescribed limits where PAN quoting requirements apply.
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  Hotel and restaurant transactions covered under the revised reporting thresholds in the Income Tax Rules, 2026.

 

Financial institutions and other reporting entities submit these details annually under the Statement of Financial Transactions by the prescribed due date.

 

Why taxpayers should keep proper records

The Income Tax Department uses information received through banks, registrars and other reporting entities to prepare a taxpayer’s Annual Information Statement. If the value of transactions reflected in the AIS does not match the income declared in the income tax return, the department may seek an explanation.

 

Maintaining a clear digital trail through bank transfers, preserving supporting documents such as sale deeds, gift deeds, loan agreements and bank statements, and ensuring that high-value transactions are correctly disclosed can help taxpayers respond to any queries more easily.

 

Taxpayers should also remember that specified high-value transactions, including large cash deposits, foreign travel expenses and certain other financial activities, may make income tax return filing mandatory even if their taxable income is below the basic exemption limit.

 

Since reporting thresholds and compliance requirements may be revised through CBDT notifications from time to time, taxpayers should verify the latest provisions before entering into high-value transactions or filing their income tax returns.