How Much Cash is Too Much? Understanding Permissible Limits on Holding, Carrying and Transacting Cash in India

We live in an age where technology is growing by leaps and bounds. The push for digitisation is at its highest. Digitisation has also transformed our relationship with money. However, even in times of cashless transactions and UPI, a significant number of people continue to rely on cash.

Ancillary to this, it is natural to question the permissible limits of cash, especially when keeping it at home or while travelling. Let us analyse three situations to develop a clearer understanding of these permissible limits.

1. How much cash can you keep at home?

The Income Tax Department has not set any limit on the amount of cash that can be kept at home. Regardless of the amount, storing cash at home is not illegal. However, if one is caught with a large amount of cash from an illegitimate source, it could be treated as undisclosed income. If you can prove that the money kept at home is your salary, business income, or part of a legal transaction, you can safely keep any amount at home. Problems arise when you can’t prove the source of the income.

Key Sections from the Income Tax Act dealing with this are -

• Section 68 of Income Tax Act, 1961 or Section 102 of the new Income Tax Act, 2025

This section covers unexplained cash credits. If a person’s financial records (such as bank accounts, cashbooks, etc.) show unexplained cash deposits, they could be considered as unexplained income, which the Income Tax Department may tax.

• Section 69 of Income Tax Act, 1961 or Section 103 of the new Income Tax Act, 2025

This section deals with unexplained investments. If a person owns assets or investments (including cash at home) without furnishing a satisfying proof of the source, the Income Tax Department has the authority to consider those assets as income that hasn't been disclosed.

• Section 69B of Income Tax Act, 1961 or Section 104 of the new Income Tax Act, 2025

This section addresses the unexplained excess of assets over reported income. The tax authorities have the power to impose penalties in case of unexplained excess amount.

2. How much cash can you carry while travelling?

As per the Reserve Bank of India, Indian residents are allowed to carry cash up to Rs. 25,000 or approximately $350 while travelling within the country. When it comes to travelling abroad from India, the amount depends on the country one is travelling to. However, the RBI has capped this number to Rs. 25,000 as well.

On the other hand, NRIs travelling to India also have to adhere to some guidelines on the amount of foreign and Indian currency they can carry. The limit is up to ₹25,000 (for Indian currency), and up to $5,000 in cash and a total of $10,000, including all forms of financial instruments, without any declaration. In case the amount exceeds these limits, it must be declared to Customs in the Currency Declaration Form at the airport.

3. Other Cash Transactions

Section 269ST of the Income Tax Act, 1961 or Section 186 of the new Income Tax Act, 2025 prohibits any person to receive in cash an amount of Rs. 2,00,000 or more -

However, this Section does not apply to any receipt by Government, banking company, post office savings bank, co-operative bank, other persons/receipts as may be notified, transactions referred to in section 269SS, and certain digital payments w.e.f. 2019-20.

Search and Seizure Operations

When authorities suspect non-compliance with aforementioned provisions, search and seizure operations (commonly referred to as raids) become the primary enforcement mechanism. Such actions are triggered by the presence of cash in large, unexplained amounts that raise a prima facie suspicion of tax evasion, money laundering, or other economic offences.

Relevant provisions include:

• Section 132 of the Income Tax Act, 1961 or Section 247 of the new Income Tax Act, 2025

This section empowers income tax authorities to conduct search and seizure operations on reasonable grounds that a person is in possession of undisclosed income or property, including cash. Such belief must be based on valid information which is a jurisdictional requirement for initiating a search.

• Sections 17 and 18 of the Prevention of Money Laundering Act, 2002

Under these sections, the ED may conduct searches of premises or persons and seize or freeze cash if it has reason to believe that such money constitutes “proceeds of crime” connected with a scheduled offence. Further, provisional attachment of cash or other assets may be ordered under Section 5 of the Act, subject to confirmation by the Adjudicating Authority under Section 8.

• Sections 93 and 165 of Code of Criminal Procedure, 1973 read with the provisions of the Prevention of Corruption Act, 1988 or other special statutes

The Central Bureau of Investigation conducts searches primarily under the Code of Criminal Procedure, 1973, read with the provisions from other special statutes, depending on the nature of the offence under investigation.

Any cash found during such raids is scrutinised, and the focus shifts to the explanation provided by the person from whose possession the cash or assets are recovered. In the absence of a satisfactory explanation, the cash may be treated as undisclosed income under Sections 68, 69, or 69B of the Income Tax Act, 1961 or as proceeds of crime under the PMLA.

It is important to note that the law provides opportunities to explain the source of cash during assessment or adjudication proceedings, and individuals retain the right to challenge unlawful or excessive action courts of law. The Hon’ble Supreme Court in CIT v. Smt. P.K. Noorjahan (1999) 237 ITR 570 (SC) held that even where an explanation regarding the source of cash is not fully satisfactory, the AO is not bound to treat the amount as undisclosed income.

To conclude, the Indian law does not prohibit the use of cash but it places indirect checks on how much cash one can hold, move, or transact with, primarily through the Income Tax Act and other related legislations. In this light, understanding the legal framework around cash holdings is important because cash continues to coexist with digital payments in everyday life.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates