There are many in India who prefer cash at home saying that it is needed for emergencies, weddings, travels, or daily expenses. While this is common, the income tax authorities keep a very strict eye on hidden cash. Should it become too much to keep at home without any justifiable source of income, the department can always issue a notice against the holders of such cash. It is, therefore, very important to know the restrictions regarding cash at home.
Is It Illegal to Keep Cash at Home?
Keeping cash at home is never considered illegal. One can freely withdraw money from the bank and hold it, provided that the money thus withdrawn corresponds with the declared income and is not kept unaccounted. If, during some scrutiny, officials come across unexplained cash, the unexplained cash may be seized, or a penalty imposed.
When Can You Receive a Notice
Cash movements through the banks and financial institutions are monitored by the Income Tax Department. Deposits or withdrawals of large sums not matching the income profile get flagged in the Annual Information Return (AIR) system. If a very large sum of cash is found at home during a raid, you will be ultimately asked to explain the source. In the inability to do so, a show-cause notice would be issued and a penalty imposed.
Rules Governing Keeping Cash at Home
There is no exact limit of cash fixed by the Government that can be kept at home. It is a matter of whether the money is accounted for or not. At the same time, strict rules exist for cash transactions with regard to banking, property, gifts, and business. For instance, cash deposits above ₹10 lakh in one year are reported to the Income Tax Department, while cash transactions above ₹2 lakh at one go are prohibited under the Income Tax Act.
Key Cash Transactions Limits
There is no limit on keeping money at home, but limits are set with regard to certain activities in cash. If the cash payment exceeds ₹20,000 for any property sale, the transaction is rendered invalid. If any person takes or gives an amount in cash exceeding ₹2 lakh as a loan or as a gift, the person shall be liable to an equal penalty. In addition, expenses more than ₹10,000 paid by businesses in cash cannot be claimed as deductions. These indirectly set the yardstick for the maximum cash that could be deemed reasonable.
Compliance Importance
The idea behind these restrictions is to check black money and bring transparency to the economy. People keeping cash beyond income records face legal action most of the time. By complying with the law, an individual can easily safeguard himself from filing unwanted notices by maintaining and retaining income records, receipts, and bank proofs.
Conclusion
For genuine emergencies, having cash on hand at home is highly okay, only when done in reasonable amounts and backed by genuine income. The Income Tax Department is very strict about money that cannot be explained or unaccounted for. Knowledge about cash deposits and withdrawal, loans and gifts, and various types of property payments will protect you from legal trouble.