With new income tax regulations tightening their grip, cash transactions in India could soon come at a crushing cost. Investment banker Sarthak Ahuja warns that unexplained cash found during a search may now attract a whopping 84% tax, including penalties, surcharges, and cess.
The cost of cash just got higher
Ahuja's post outlines key provisions of India's revised cash-handling rules and the heavy penalties that now apply to individuals and businesses who fall foul of them.
“Everyone should know the regulations that are now coming to order,” he wrote, stressing that 84% tax liability applies if unexplained cash is discovered at one's premises during a search or seizure by the Income Tax Department.
The real concern, he says, is that the chances of being flagged have never been higher.
How the tax department knows
The tax department is being automatically notified of large cash movements. Ahuja notes that:
- If you withdraw over ₹10 lakh in cash in a financial year, your bank will report it to the Income Tax Department.
- If you withdraw over ₹20 lakh, the bank will deduct TDS (tax deducted at source) on the withdrawal.
- Repeated large withdrawals could prompt the department to initiate a search or seizure, particularly if the source is unclear.
Zero tolerance for shady cash deals
Some transactions now attract 100% penalty — meaning you could pay double the amount in total:
- Receiving over ₹2 lakh in cash from a single customer in a day
- Accepting cash loans of any amount
- Receiving over ₹20,000 in cash when selling property
“These provisions are very real and already in force,” Ahuja warns.“The government can literally catch anyone today with the amount of information they have on your transactions.”
Why this matters now
These rules are part of the government's broader crackdown on black money, unaccounted wealth, and informal transactions. While many of the provisions are not new, enforcement has grown stricter with better data-sharing between banks, registrars, and tax authorities.
For individuals and small businesses used to handling cash, the message is clear: document everything or risk financial ruin.
