Well, it is perfectly legal to save large amounts of cash in India as long as you have proof that you earned that money and have already paid the tax on it. That’s the only condition. In India, the Income Tax Act is the one under which everything cash-related is specified. There are several parts of this Act that tell you how much cash you can carry and the rules you need to follow. Most of the laws are in the Income Tax Act, but the Reserve Bank of India (RBI) also has some say in how cash is handled. In particular, sections 68 to 69B deal with assets and income that can’t be explained. So, let’s understand it in a better way.
Is There a Limit to How Much Cash You Can Keep?
Tax experts say that in India, there is no set cap on how much cash you can keep at home. Though, the law doesn’t say what the limit is. You must, however, show that the money comes from a real source. This means putting all of your pay on your pay Tax Return (ITR) and keeping good records of your money. In the case of a business, the cash you keep on hand should match the cash book. You should be able to demonstrate that the cash came from bank payments, gifts, or other legal sources, even if you’re not running a business. Also, if you don’t keep proper records, taking cash gifts or money from property deals worth more than Rs 2 lakh can get you in trouble.
Key Rules You Shouldn’t Ignore
There are limits on cash deals in some parts of the Income Tax Act. Part 269ST says you can’t get more than Rs 2 lakh in cash from a single person in a day, either for one transaction or for several transactions connected to the same event or occasion. Though, checks and electronic transfers are good ways to send large amounts of money. As per Section 40A(3), you should not pay for anything with cash that costs more than Rs 10,000. This cost won’t be deductible under the Income Tax Act if you do that. Sections 269SS and 269T cover cash loans and deposits. It is against the law to accept or return cash loans or deposits over Rs 20,000. To make sure there is a record, these kinds of deals should always go through a bank.
The Cost of Breaking the Rules
There are big consequences if you don’t follow these rules. For instance, if you can’t explain where a lot of cash came from, it can be taxed at a rate of 78% and you may also have to pay other fines. Section 271DA says that you will have to pay a fine equal to the amount of cash you got if you receive it in a way that is against Section 269ST. Section 271E also says that if you return a loan or deposit in cash without following Section 269T, you will be fined the same amount as the loan or deposit.
Real-Life Cases
People have been caught with big amounts of cash that they couldn’t explain in a number of high-profile cases. For instance, Income Tax officials once found Rs 351 crore in cash at the home of a minister. He said the money came from his family’s liquor business, but he couldn’t show it was real income, so the money was taken away and he got in trouble with the law.
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