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There is no legal restriction on the amount of money an individual can keep at home, provided it comes from legitimate sources and has been declared in income tax filings.
Burnt cash found at Judge Verma’s home sparks debate. (Representative/AP File)
A shocking discovery at the residence of Delhi High Court judge Yashwant Verma has reignited discussions about the legality of keeping large sums of cash at home. The controversy erupted after authorities recovered bundles of burnt currency notes from Verma’s house following a fire on March 14. In response, Chief Justice Sanjiv Khanna set up a three-member panel of senior judges to investigate the case. As scrutiny intensifies, many are left wondering: how much cash can one legally hold at home?
According to a Financial Express report, there is no legal restriction on the amount of money an individual can keep at home, provided it comes from legitimate sources and has been declared in income tax filings. However, failing to provide a valid explanation for large sums of cash can lead to severe consequences. Tax authorities not only have the power to seize the money but can also impose a penalty of up to 137% of the unaccounted amount.
Experts emphasise the importance of maintaining proper documentation for all cash holdings, including receipts, bank withdrawal slips, and transaction records. Financial experts advise against excessive cash transactions to avoid tax scrutiny, Republic TV reported.
Regulatory limits exist for cash transactions:
- For bank deposits or withdrawals over Rs 50,000, individuals must provide their PAN details.
- If a person deposits Rs 20 lakh or more in cash within a year, both PAN and Aadhaar must be furnished to authorities.
- Buying or selling property in cash transactions exceeding Rs 30 lakh can trigger an investigation.
- Credit card expenditures exceeding Rs 1 lakh in a single transaction may also attract scrutiny.
Tax Implications of Unexplained Cash Holdings
The Income Tax Act does not explicitly cap the amount of cash a person can keep at home. However, any significant sum must be properly documented to avoid being classified as unexplained income as outlined in Sections 68 to 69B of the Act.
Tax expert Naveen Wadhwa, Vice President of Taxmann, told Financial Express that if the the source of the cash cannot be satisfactorily explained, it may be taxed as undeclared income at 78% with additional penalties.
Rs 2 Lakh Limit on Cash Gifts and Transactions
Tax and investment specialist Balwant Jain clarified that while businesses must ensure their cash reserves align with recorded financial books, individuals too must be prepared to justify their cash holdings. Jain further highlighted that tax laws prohibit receiving gifts or making property transactions in cash exceeding Rs 2 lakh. Violating this rule can lead to penalties equal to the amount involved.