Cash Transaction Limits in India: What the Income-tax Act Allows, What Your Bank Reports, and Your Free Cash Limits

India still runs on a lot of cash. RBI's Annual Report counts ₹41.24 lakh crore of notes in circulation at the end of March 2026, 11.9% more than a year earlier. So the question comes up every day: how much cash can I take, give, deposit or withdraw? The answer sits in three places. The Income-tax Act decides how cash may change hands. The Income-tax Rules decide what your bank tells the tax department. And your bank decides how many cash transactions are free. This guide takes them one at a time, in plain words, for tax year 2026-27.

Law as on 2 November 2026: the Income-tax Act, 2025 as amended by the Finance Act, 2026, and the Income-tax Rules, 2026. The old 1961 section numbers are given in brackets for readers who know them. Bank charges are from each bank's published schedule and change from time to time; check your own bank's current schedule before relying on a figure. This explains the rules. It is not advice on your own case.

All the cash limits at a glance

One rule protects you in all three penalty cases: under section 470, no penalty is imposed if you prove there was a reasonable cause for the failure.

Receiving cash: the ₹2 lakh rule (section 186)

Section 186 says no person shall receive ₹2 lakh or more otherwise than by an account payee cheque, an account payee draft, an electronic transfer through a bank account or another prescribed electronic mode, where the cash comes:

• from one person in a day, whatever it is for;
• for one transaction, even if paid over several days; or
• for one event or occasion from a person, even if split across bills.

Three things people miss:

• The penalty falls on the receiver. If you sell your old car for ₹3 lakh in cash, it is you, the seller, who faces a penalty of ₹3 lakh under section 451, not the buyer.
• Splitting does not help. A jewellery bill of ₹2.4 lakh paid as two cash bills of ₹1.2 lakh is still one transaction, and a wedding's catering paid in instalments is still one occasion.
• Withdrawing from your bank is fine. Section 186(2) itself excludes receipts by the government, banks, post office savings banks and co-operative banks, and loans and deposits, which section 185 covers instead. Cash you receive from a bank, such as a withdrawal from your own account, is exempt under a notification of 2017 (S.O. 1057(E)) that the department's reckoner on cash rules still lists. The same reckoner lists other notified receipts, such as payments to a bank's business correspondent, a white-label ATM operator, a prepaid instrument issuer, or a credit card company for a card bill.

Loans, deposits and property deals in cash (sections 185 and 188)

Cash loans between friends and relatives are where honest people most often slip. Section 185 bars taking or accepting a loan, deposit or specified sum in cash if the amount, or the amount still unpaid from the same person including earlier sums, is ₹20,000 or more. Section 188 applies the same ₹20,000 limit to repayments, counting interest.

• A cash loan from a friend. Borrowing ₹50,000 in cash from a friend breaks section 185, and the penalty is ₹50,000 on you, the borrower. If you already owe the friend ₹15,000 and take ₹10,000 more, the total of ₹25,000 crosses the line.
• Property token money. The department's reckoner explains "specified sum" as money for the transfer of immovable property, as an advance or otherwise, whether or not the transfer takes place. A seller who takes a ₹1 lakh token in cash faces a penalty of ₹1 lakh; if the deal falls through and the advance is returned in cash, section 188 is broken as well.
• Exceptions. Loans from or to the government, banks, post office savings banks, co-operative banks, government companies, statutory corporations and notified bodies; and cases where both sides have only agricultural income and no taxable income. Between a primary agricultural credit society and its member, the limit is ₹2 lakh. A bank branch may also repay a deposit by crediting it to your account at that branch.

For business owners: the ₹10,000 a day rule (section 36)

If you run a business or practise a profession, any expense paid to one person in a day above ₹10,000, by any mode other than the specified banking or online modes, is not allowed as a deduction (section 36(4)). The limit is ₹35,000 for payments for plying, hiring or leasing goods carriages (section 36(6)). If you claimed an expense in an earlier year and pay it in cash above ₹10,000 later, the payment is taxed as business income in the year you pay (section 36(5)). Rule 26 of the Income-tax Rules, 2026 (the old rule 6DD) lists a small set of exceptions.

Example: a shopkeeper pays a supplier ₹15,000 in cash on one day. The whole ₹15,000 is disallowed, not just the ₹5,000 above the limit. Paying ₹7,500 in cash on two different days is a different case, but paying ₹15,000 as two cash slips on the same day is not, because the limit counts the aggregate paid to a person in a day.

Businesses that are audited also report cash receipts above ₹2 lakh for a sale of goods or services to the tax department (rule 237, item 12).

What your bank tells the tax department, and when PAN is needed

The law sets no ceiling on the cash you can deposit in your own account. What it does is make the cash visible. Under rule 237 of the Income-tax Rules, 2026, banks file a statement of financial transactions (SFT) every year. The figures are added across all your accounts of the same kind in the bank, and in a joint account the whole amount is counted against each holder.

These reports are linked to your PAN, and the e-filing portal's FAQ explains that SFT information is shown to you in your Annual Information Statement (AIS), where you can give feedback if an entry is wrong.

PAN itself is required by rule 159 when:

• your cash deposits in one or more accounts reach ₹10 lakh in a financial year;
• your cash withdrawals reach ₹10 lakh in a financial year;
• you pay a hotel, restaurant, banquet hall, convention centre or event manager more than ₹1 lakh in cash against a bill at one time;
• you open a bank account, other than a basic savings (BSBD) account or a fixed deposit, and for a fixed deposit above ₹50,000, or above ₹5 lakh in a year.

The old rule asked for PAN on any cash deposit above ₹50,000 in a day; rule 159 now looks at the yearly total. A person without PAN who reaches ₹10 lakh in cash deposits or withdrawals must apply for one (rule 159(3)); a declaration in Form 97 is allowed only for the later items in the table, such as the hotel bill.

Is there a cash limit based on your income?

No law ties the cash you can deposit, withdraw or keep at home to your income. Banks do not set one either. The link to income is different, and it matters more: you must be able to explain where the cash came from.

• When cash deposits cross ₹10 lakh in a year, the bank reports them, and the department can compare them with the income in your return.
• If the source cannot be explained, the money can be treated as unexplained income under sections 102 to 106. Section 195 taxes such income at a flat 30%, with no deduction for any expense and no set-off of any loss. The Finance Act, 2026 cut this rate from 60% with effect from 1 April 2026.
• Keep the trail: bank withdrawal slips for cash you took out earlier, sale deeds or receipts for things you sold, gift deeds from relatives, and business books for shop takings.

Two kinds of account do have limits of their own, set by RBI and the banks:

• A "small account", opened without the usual identity documents under RBI's KYC rules: credits in a financial year cannot exceed ₹1 lakh, withdrawals and transfers ₹10,000 a month, and the balance ₹50,000 at any time. Government grants, welfare benefits and procurement payments are not counted against the balance limit.
• A basic savings (BSBD) account, the zero-balance account: deposits are not limited, but free withdrawals are. HDFC Bank allows four a month, counting transfers and ATM withdrawals but not digital payments such as UPI, IMPS, NEFT and RTGS. SBI allows four free cash withdrawals a month across branch, ATM and other cash modes, and from 1 October 2026 charges ₹15 + GST for each extra one; its digital transfers stay free.

Free cash limits in your bank

ATMs: RBI's rule for every bank

RBI's circular on ATM charges, as updated on 28 March 2025, sets the minimum free transactions for savings account holders each month. Free transactions count both cash withdrawals and non-cash ones such as balance enquiries at other banks' ATMs.

RBI's FAQ adds three useful points. A bank may give more free transactions than this minimum. Transactions that fail for the bank's own reasons, such as a machine fault or no cash in the ATM, do not count. And if a failed withdrawal is not re-credited within five calendar days, the bank must pay you ₹100 a day for the delay. Basic savings accounts follow their own withdrawal rules instead.

Branches: each bank sets its own limits

For cash at the counter, RBI sets no common number. Each bank publishes a schedule, and the free limits depend on the account variant and your balance. Two of the largest banks, from their own schedules:

SBI's figures are from its revision of service charges as on 30 September 2024 and its ATM notices of 2025 and 2026; HDFC Bank's are from its schedule updated in May 2026. Other variants, such as salary and premium accounts, get more free transactions.

Five everyday cases

1. Selling a used car for ₹3 lakh. Ask for a bank transfer. Taking ₹3 lakh in cash from the buyer breaks section 186, and the penalty of ₹3 lakh is on you as the seller.
2. Paying a ₹1 lakh token for a flat. The seller cannot accept it in cash under section 185, and if the deal is cancelled, it cannot be returned in cash under section 188. Pay by cheque or transfer and keep the receipt.
3. Depositing ₹12 lakh of savings in a year. Allowed. Because the total crosses ₹10 lakh, you must quote PAN and the bank will report it. Keep the papers that show where the cash came from.
4. A trader withdrawing ₹1.5 crore in cash in a year from one bank. Once withdrawals cross ₹1 crore, the bank deducts TDS at 2%. It is credited against the trader's tax for the year, not lost.
5. A shop paying a supplier ₹15,000 in cash in one day. The whole ₹15,000 is disallowed as an expense under section 36(4). Paying by UPI or bank transfer keeps the deduction.

Frequently Asked Questions

How much cash can I deposit in my savings account in a year? There is no legal maximum. When your cash deposits reach ₹10 lakh in a financial year, you must quote PAN and the bank reports the total to the tax department, so keep proof of the source.

Will the income tax department know about my cash deposits? Yes, once they reach ₹10 lakh in a year in savings accounts, or ₹50 lakh in current accounts. The bank reports them under rule 237, and they appear in your Annual Information Statement on the e-filing portal.

Can I withdraw ₹2 lakh or more in cash from my own bank account? Yes. Cash received from a bank is exempt from the ₹2 lakh rule of section 186 under a 2017 notification that the department still lists. TDS applies only once your cash withdrawals from a bank cross ₹1 crore in the year.

How much cash can I accept when I sell something? Less than ₹2 lakh from one buyer in a day, for one sale, or for one event. At ₹2 lakh or more, take a cheque or a bank transfer, or face a penalty equal to the cash received.

Can I lend or borrow money in cash from a friend or relative? Only below ₹20,000, counting any earlier amount still unpaid. Repayments of ₹20,000 or more must also be by cheque or bank transfer.

Is there a limit on cash I can keep at home? The Income-tax Act sets no limit. But if cash found with you cannot be explained, it can be taxed as unexplained money at 30% under section 195, with no deductions.

How many free cash transactions does my bank give? At ATMs, RBI's minimum is 5 a month at your own bank and 3 (in six metros) or 5 (elsewhere) at other banks. At the branch, it depends on your bank and balance: for example, 3 free cash deposits a month at SBI, and 4 free cash transactions a month on an HDFC Bank Regular Savings account.

What if I broke a cash rule by mistake? Section 470 says no penalty is imposed if you prove there was a reasonable cause. Keep the facts and papers that show why the payment had to be in cash.