High-Value Cash Transactions May Attract 84% Tax, Here Is How

A growing number of taxpayers are worried about keeping large sums of cash at home. While storing cash is not illegal, the tax department now monitors unusual cash activity more closely. If a search reveals cash that cannot be explained properly, the amount may be treated as unexplained income and taxed heavily.

Can IT Department Actually Levy 84% Tax on Undisclosed Cash? 

The law does not tax cash lying at home by default. The steep burden applies only when the money is categorised as unexplained income under specific sections of the Income Tax Act. When a person cannot clearly show the source of the money or prove the identity and capacity of the person who gave it, the tax calculation becomes severe.

The 84% figure comes from the following components:

• 60% tax under Section 115BBE
• 25% surcharge on this tax
• 4% health and education cess
• 10% penalty under Section 271AAC if the income was not disclosed earlier

High-Value Cash Transactions At Risk of Attracting 84% Tax

The tougher environment is not limited to search cases. Certain common cash transactions now attract strict penalties:

• Receiving ₹2 lakh or more in cash from one person in a day can lead to a penalty equal to the amount received.
• Accepting or giving cash loans above ₹20,000 violates the rules and may trigger a 100% penalty.
• Cash payments above ₹20,000 in property transactions are red flags.

These rules apply to everyone: families, salaried individuals, freelancers, traders and small businesses.

Do High-Value Cash WithdrawalsRaise Questions?

Large cash withdrawals are allowed, but banks must report them under SFT rules. Withdrawals or deposits above ₹10 lakh in savings accounts or ₹50 lakh in current accounts are tracked. TDS between 2% and 5% may also apply on very high withdrawals. These alerts help the tax department detect patterns that do not match declared income.

How To StaySafe?

A simple way to avoid problems is to maintain a clear paper trail. Keeping withdrawal slips, sale papers, receipts and bank statements helps prove the source of cash. Avoiding high-value cash transactions and checking AIS regularly can prevent future disputes.

Conclusion

The rules around cash are far stricter today. Keeping records and reducing high-value cash dealings can protect taxpayers from the 84% tax risk. Cash is still allowed, but only when it is fully explained and properly documented.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.