Do the New Income Tax Rules Really Impose an 84% Penalty on Cash Kept at Home?

Over the past few days, social media has been flooded with one headline: “Income Tax will take away 84% of your cash lying at home.”
Predictably, this has created confusion, panic, and a lot of half-baked interpretations.
Let’s break this down calmly, logically, and without sensationalism.

Where Does This 84% Figure Come From?

The 84% tax isn’t a new “rule” suddenly introduced.
It comes from existing provisions that apply only when the cash found during a search cannot be explained.

When cash is seized during an Income Tax raid and the taxpayer fails to prove:

• the source of cash
• its nature
• its linkage with income already disclosed

then the amount is treated as unexplained income under sections like 68, 69, 69A of the Income Tax Act.

On such unexplained money, the combined effect of:

• Basic Tax (60%)
• Surcharge
• Cess
• Penalty (up to 60% of tax)

brings the effective outflow to roughly 83.25%–84%.

This means the government can practically take away most of that unexplained cash.

So yes 84% is real, but it applies only when the cash is unexplained and is found during a search.

Does This Mean You Can’t Keep Cash at Home?

Absolutely not.

Keeping cash at home is not a crime.
But you must be able to:

• justify the source
• show withdrawals in your bank account
• demonstrate linkage with declared income

The law targets unaccounted or suspicious cash, not everyday household savings.

How Will the Department Know? Bank Reporting Norms Explained

Banks today are required to report high cash transactions under the SFT (Statement of Financial Transactions).

Two important thresholds:

1. Cash Withdrawals Above Rs 10 Lakh per Year (Savings Account)

Your bank reports it to the Income Tax Department.

2. Withdrawals Above Rs 20 Lakh per Year

Banks deduct TDS before handing over the cash.

These are not penalties.
These are tracking mechanisms.

The logic is simple:
If someone is withdrawing unusually large sums of cash, the system flags it.

Property Deals: A 100% Penalty for Cash Payments.

One of the most misunderstood areas is real estate.

If you receive more than Rs 20,000 in cash for a property transaction:

You invite a 100% penalty on the entire cash amount received.

Example:
Receive Rs 50,000 in cash → You may have to pay a Rs 50,000 penalty.

The law aims to eliminate black money in real estate deals.

Cash Receipts Above Rs 2 Lakh: Another 100% Penalty Zone

Whether you are a business or an individual:

If you receive more than Rs 2 lakh in cash from a single person in a day, you risk a 100% penalty.

It applies to:

• Sale of goods
• Provision of services
• Personal transactions
• Gifts
• Any purpose

The objective again is transparency, not harassment.

Cash Loans From Friends and Family Are Also Prohibited

Many still believe borrowing or lending cash privately is harmless.

But the law says otherwise:

If you take a loan in cash, a 100% penalty applies on the loan amount.

Loans must be through:

• Bank transfer
• Cheque
• Digital mode

The idea is to ensure traceability of funds.

So Why Is This Relevant Today? The Compliance Net Has Tightened

What has changed is not the rulebook, but the technology supporting it.

Today:

• Banks
• Payment apps
• NBFCs
• Investment platforms

all share data with the Income Tax Department.

Mismatch detection is automated. Suspicious patterns get flagged instantly.

You no longer need to be on the radar.
The radar finds you.

This is what CA Sarthak Ahuja meant when he said:

“The government can literally catch anyone today with the amount of information they have on your transactions.”

He’s right not because the laws have changed overnight, but because the monitoring has become far more sophisticated

Final Thoughts: Clarity Over Panic

The takeaway is simple:

• Keeping cash at home is not illegal.
• Unexplained cash, especially large amounts, can lead to tax and penalties.
• Cash-heavy transactions (property, loans, business receipts) are being aggressively discouraged.
• Banking systems are now designed to flag unusual patterns automatically.

The message is not to fear cash.
The message is to stay compliant, maintain documentation, and avoid transactions that cannot be explained later.

As professionals, our role is to ensure people focus on facts, not fear.