269ST of income tax act says nobody may receive ₹2 lakh or more in cash from one person in a single day, for a single transaction, or for one event or occasion. The receiver, not the payer, pays a penalty equal to the full cash received.
It is one of several cash rules. Loans and deposits taken or repaid in cash are capped at ₹20,000, business expenses paid in cash above ₹10,000 a day are disallowed, and large cash deposits are reported to the department by your bank. The rules below are for FY 2025-26 and carry on into tax year 2026-27, now governed by the Income-tax Act, 2025. The deductions hub lists the cash bar on donations and health cover too.
Quick facts
Cash receipt limit (269ST)
Below ₹2 lakh per person per day, per transaction or per eventPenalty (271DA)
100% of the cash received, charged to the receiverLoans and deposits (269SS, 269T)
₹20,000 or more only by banking channels; penalty equal to the amountBusiness expense (40A(3))
Cash above ₹10,000 a day to one person disallowed; ₹35,000 for transportersUnexplained cash (68, 69, 69A)
60% tax plus 25% surcharge and cess, about 78%Bank reporting
Cash deposits of ₹10 lakh or more in a year in savings accounts (SFT-004)
The three tests in section 269ST of income tax act
Each test is applied on its own. Breaching any one is enough.
- Per person per day: total cash from one person on one day is ₹2 lakh or more, even across different bills.
- Per transaction: a single deal of ₹2 lakh or more is settled in cash, even if paid in parts on different days.
- Per event or occasion: cash linked to one wedding, function or project reaches ₹2 lakh or more from a person.
Two cases. A jeweller sells a necklace for ₹2,40,000 and takes ₹1,20,000 cash on Monday and ₹1,20,000 on Friday. Each day is under ₹2 lakh, but the transaction test fails, so the jeweller faces a penalty of ₹2,40,000. A caterer takes ₹1,50,000 cash for a sangeet and ₹90,000 for the reception of the same wedding: ₹2,40,000 for one occasion, the same result.
Receipts by the government, a bank, a post office savings bank or a co-operative bank are outside the rule, as are cash withdrawals from your own bank account. Loans and deposits are dealt with by 269SS instead.
Cash payment limit as per income tax: every rule in one table
| Rule | What is limited | Limit | Effect of breach |
|---|---|---|---|
| 269ST | Receiving cash | Under ₹2 lakh | Penalty equal to the cash (271DA) |
| 269SS | Taking a loan, deposit or property advance in cash | Under ₹20,000 | Penalty equal to the amount (271D) |
| 269T | Repaying a loan or deposit in cash | Under ₹20,000 | Penalty equal to the amount (271E) |
| 40A(3) | Business expense paid in cash | ₹10,000 a person a day (₹35,000 for transporters) | Expense disallowed |
| 43(1) | Cash paid to buy a business asset | ₹10,000 | Not counted in cost, so no depreciation on it |
| 80G | Donation in cash | ₹2,000 | Deduction refused above that |
| 80D | Health insurance premium in cash | Nil | No deduction; preventive check-up may be paid in cash |
| 194N | Cash withdrawn from bank | ₹1 crore a year | 2% TDS by the bank |
No section caps how much cash you may deposit in your own account. What matters is whether the source is explained.
Section 269SS and section 269T of income tax act: loans in cash
Section 269SS bars accepting a loan, deposit or an advance for land or a building of ₹20,000 or more other than by account payee cheque, draft, bank transfer or other electronic mode. Section 269T applies the same limit when the loan or deposit is repaid. Money from a relative counts too; family loans should move through the bank.
A shop owner who borrows ₹50,000 in cash from a friend to stock up before Diwali breaches 269SS, and the penalty can be ₹50,000. Loans from or to a bank, the government or a co-operative bank are outside the rule, and so are cases where both sides have only agricultural income and no taxable income.
Section 40A(3) of income tax act: cash spent in business
A business or professional who pays more than ₹10,000 in cash to one person in one day loses the deduction for that expense. For hiring or plying goods carriages the limit is ₹35,000. Splitting one bill into smaller cash slips on the same day does not help, because the limit is per day per payee.
Example: a bakery pays its flour supplier ₹14,000 in cash on one day. The whole ₹14,000 is disallowed and added back to profit. Rule 6DD lists the narrow exceptions, such as payments in a village with no bank. The auditor reports these payments in the tax audit report.
Cash deposit limit in bank as per income tax act and SFT
| SFT code | Transaction reported | Threshold in the year |
|---|---|---|
| SFT-003 | Cash deposits or withdrawals in current accounts | ₹50 lakh or more |
| SFT-004 | Cash deposits in savings and other non-current accounts | ₹10 lakh or more |
| SFT-005 | Time deposits (fixed deposits) made | ₹10 lakh or more |
| SFT-006 | Credit card bills paid | ₹1 lakh in cash or ₹10 lakh in total |
SFT, the Statement of Financial Transactions, is a report that banks and other bodies file with the department about high-value deals. These entries show up in your AIS. Banks also ask for PAN on a cash deposit above ₹50,000 in a day, and for PAN or Aadhaar once cash deposits in a year add up to ₹20 lakh. There is no TDS on cash deposits; TDS applies only to large cash withdrawals under 194N.
Section 68 of income tax act, 69 and 69A: when cash cannot be explained
Section 68 covers a credit in your books you cannot explain, section 69 an investment, and section 69A money, jewellery or other valuables. All three are taxed at a flat 60% under section 115BBE, with a 25% surcharge and 4% cess, and no deduction or slab benefit.
A salaried person deposits ₹12,00,000 in cash and cannot show where it came from. Tax at 60% is ₹7,20,000. Surcharge at 25% adds ₹1,80,000, making ₹9,00,000. Cess at 4% adds ₹36,000. Total: ₹9,36,000, which is 78% of the deposit, before any penalty.
Cash rules under the Income-tax Act, 2025
| Rule | FY 2025-26 (1961 Act) | Tax year 2026-27 (2025 Act) |
|---|---|---|
| Cash receipt limit | ₹2 lakh under 269ST | Same limit carried into the new Act |
| Loans and deposits | ₹20,000 under 269SS and 269T | Same limit |
| Year for the test | Financial year 2025-26 | Tax year |
The provisions were renumbered in the 2025 Act. Until you have checked the new section number on the department's Acts page, refer to them by their old numbers and the limit.
Cash slips and how to avoid them
| Slip | Fix |
|---|---|
| Taking ₹2 lakh or more for one sale in instalments of cash | Ask for the balance by UPI or bank transfer |
| Repaying a relative's ₹1 lakh loan in cash | Repay by bank transfer to stay within 269T |
| Depositing gifted cash without any record | Keep a gift deed and the giver's identity |
| Paying a supplier ₹15,000 cash in one go | Pay by bank; cash above ₹10,000 a day loses the deduction |
This explains the cash rules in general and is not advice on any particular deal. Penalties depend on facts, so take a chartered accountant's view or check the e-filing portal before acting.
Sources we checked
- Income-tax Act, 1961, sections 269SS, 269ST and 269T
- Income-tax Act, 1961, section 40A(3)
- Income-tax Act, 1961, section 115BBE
- Income-tax Rules, 1962, rule 114E
Frequently asked questions
What is 269SS of income tax act?
It bars taking a loan, deposit or property advance of ₹20,000 or more in cash. The penalty under section 271D equals the amount taken.
What is the income tax cash deposit limit in a savings account?
There is no legal cap. Deposits of ₹10 lakh or more in a year are reported by the bank under SFT-004 and appear in your AIS, so keep proof of the source.
What is SFT in income tax?
SFT stands for Statement of Financial Transactions. Banks, registrars and others report high-value transactions to the department, and the data appears in your AIS.
What does SFT 005 in income tax mean?
SFT-005 is the report of time deposits, such as fixed deposits, of ₹10 lakh or more in the year. Renewals of an existing deposit are not counted.
Is there TDS on cash deposit?
No. TDS under section 194N applies to cash withdrawals above ₹1 crore in a year, at 2%.
What is the cash transaction limit per day as per income tax act?
You may not receive ₹2 lakh or more in cash from one person in a day. A business expense paid in cash above ₹10,000 to one person in a day is also disallowed.