Section 269ST Cash Limit (2026): Rs 2 Lakh Rule, Penalty & Section 186 Explained

Receiving Rs 2 lakh or more in cash from one person can cost the receiver the same amount again as penalty. Section 269ST of the Income-tax Act sets this limit, and from 1 April 2026 the same rule continues as Section 186 of the Income-tax Act, 2025.

Section 269ST (now Section 186) bars receipt of Rs 2 lakh or more in cash from one person in a day, in one transaction, or in transactions linked to one event. The receiver, not the payer, faces a penalty equal to 100% of the amount received.

What is Section 269ST of the Income Tax Act?

Section 269ST was added to the Income-tax Act on 1 April 2017. It says that no person shall receive Rs 2 lakh or more in cash from a single person when any one of the following is true:

1. The cash is received in aggregate on a single day.
2. The cash is received for a single transaction.
3. The cash is received for transactions that relate to one event or occasion.

If any one of the three conditions is met, the rule is broken.

The law also tells you how such receipts must be made. Acceptable modes are:

• Account-payee cheque
• Account-payee bank draft
• Electronic clearing system through a bank account
• Any other prescribed electronic mode

A receipt of Rs 2 lakh or more in any other mode breaches the rule.

How does the Rs 2 lakh cash limit work?

The three triggers

Trigger	What it means
Single-day aggregate	All cash received from the same person on the same calendar day adds up. If the total reaches Rs 2 lakh, the limit is breached.
Single transaction	A single transaction of Rs 2 lakh or more breaches the rule even if the cash is collected in instalments over time.
Single event or occasion	Cash received for the same purpose — for example, a wedding, a property sale, or a single order — is treated as one event. If the cash for that event is Rs 2 lakh or more, the limit is breached.

Only one of the three needs to be true to attract a penalty.

Worked example — two payments in one day

Morning payment: Rs 1,20,000
Evening payment: Rs 90,000

Both payments are from the same person and on the same day.
Total cash received = Rs 1,20,000 + Rs 90,000 = Rs 2,10,000.

Even though each payment is below Rs 2 lakh, the aggregate-in-a-day test is met, so the limit is broken.

Who pays the penalty — the payer or the receiver?

The Income-tax Act places the liability on the receiver of the cash. The person who gives the cash (the payer) does not face the penalty under Section 269ST/Section 186.

The payer may still run into other problems, such as loss of tax deduction for large cash business expenses (see Section 40A(3) below), but the specific cash-receipt penalty is only for the receiver.

What is the penalty for breaking Section 269ST?

The penalty is laid down in Section 271DA (now Section 451). It is 100% of the amount received in cash that breaches the rule.

• Under the 1961 Act, the penalty is imposed by the Joint Commissioner of Income Tax.
• The Joint Commissioner may not levy the penalty if the receiver can show a good and sufficient reason for the violation.

Worked examples

1. Shop invoice — A shop receives Rs 3,00,000 in cash for a single invoice.
   Cash received = Rs 3,00,000 (Rs 2 lakh or more, single transaction).
   Penalty = 100% of Rs 3,00,000 = Rs 3,00,000.

2. Two payments in one day — A customer pays Rs 1,20,000 in the morning and Rs 90,000 in the evening.
   Aggregate cash = Rs 2,10,000 (Rs 2 lakh or more).
   Penalty = 100% of Rs 2,10,000 = Rs 2,10,000.

3. Used-car sale — A used car is sold for Rs 2,50,000 in cash.
   Single transaction = Rs 2,50,000 (Rs 2 lakh or more).
   Penalty = 100% of Rs 2,50,000 = Rs 2,50,000.

Note that the penalty is on top of any tax due on the income itself. It is not a percentage of the tax — it is the full cash amount.

What changed in 2026 — Section 186 and Section 451

The Income-tax Act, 2025 came into force on 1 April 2026 (Tax Year 2026-27). The provisions of Section 269ST have been renumbered:

Old provision (1961 Act)	New provision (2025 Act)	When it applies
Section 269ST (cash limit)	Section 186	For FY 2026-27 and later
Section 271DA (penalty)	Section 451	For FY 2026-27 and later

The Rs 2 lakh limit, the three triggers, and the 100% penalty remain exactly the same. Only the section numbers changed.

For income earned in FY 2025-26 (the year before the change), the old sections (269ST and 271DA) still apply.

What are the exceptions to the Rs 2 lakh cash limit?

Cash receipts that are outside the scope of Section 269ST/186 are:

Exempt source	Reason
Government of India	Specifically excluded
Banking company	Specifically excluded
Co-operative bank	Specifically excluded
Post office savings bank	Specifically excluded
Any entity notified by the Central Government	As per the notification

If the cash comes from any of the above, the Rs 2 lakh rule does not apply.

How much cash can you keep at home?

The law does not set a limit on the amount of physical cash you may hold.

• However, you must be able to explain the source of the cash if tax authorities ask.
• Banks must report cash deposits of Rs 10 lakh or more in a savings account during a financial year.
• TDS (Tax Deducted at Source) applies on cash withdrawals that exceed Rs 1 crore in a year. For persons who have not filed income-tax returns, the TDS threshold is Rs 20 lakh.

So, while you can keep any amount at home, large cash holdings may attract scrutiny and reporting requirements.

Other cash limits you should know

Section (1961 Act)	New section (2025 Act)	Cash limit	What is barred	Penalty provision
269SS	185	Rs 20,000 (loan or deposit)	Accepting a cash loan or deposit of Rs 20,000 or more	271D (100% of amount)
269T	— *	Rs 20,000 (repayment)	Repaying a loan or deposit of Rs 20,000 or more in cash	271E (100% of amount)
40A(3)	36 **	Rs 10,000 (business payment to one person per day)	Cash payment above Rs 10,000 loses its tax deduction. For goods transporters the limit is Rs 35,000.	No penalty, only loss of deduction

* The 2025 Act number for Section 269T is not stated here — the 1961 Act section still applies to FY 2025-26.
** Business Today reports Section 40A(3) is now Section 36 of the 2025 Act.

These rules operate alongside the Rs 2 lakh cash-receipt limit. They target different types of cash transactions.

Does the cash limit apply to gifts from relatives?

Cash gifts from specified relatives — parents, spouse, siblings and others listed in the law — are exempt from income tax if they are genuine gifts. But the Rs 2 lakh cash-receipt rule still applies.

If a relative gives you Rs 2 lakh or more in physical cash, the receipt breaches Section 186 (formerly 269ST) and may attract the 100% penalty. The safe way to receive a large gift is through a bank transfer or cheque.

The Rs 50,000 gift-tax threshold that applies to gifts from non-relatives is a separate rule and does not change the cash-receipt limit. Read our detailed guide on gift tax on Diwali gifts from family and friends for the full gift rules.

Common mistakes to avoid

Mistake	Why it is wrong
Splitting a large cash payment across two days to stay below Rs 2 lakh each day.	The “single-event” test catches it if the splits are for the same purpose. The limit still applies.
Thinking the payer will be penalised for giving cash over Rs 2 lakh.	Only the receiver is liable for the 100% penalty under Section 186/269ST.
Paying a supplier Rs 15,000 in cash and claiming the full amount as a deduction.	Under Section 40A(3) cash payments above Rs 10,000 to a single person in a day lose their tax deduction.
Accepting a large cash advance for a wedding or property deal without checking the limit.	Any cash receipt of Rs 2 lakh or more from one person, even as an advance, breaches the rule.
Assuming that a cash gift from a family member is safe no matter the amount.	Cash gifts of Rs 2 lakh or more still trigger the cash-receipt penalty, even if they are tax-free.
Believing that keeping a lot of cash at home is illegal.	There is no legal cap, but you must be able to explain the source and be ready for bank reporting and TDS rules.

Avoiding these mistakes helps you stay clear of penalties and deduction problems. If you regularly receive large payments, also check the related rules on TDS on FD interest under Section 194A and how clubbing of income works when money moves between family members.

Frequently Asked Questions

1. What is the cash limit under Section 269ST?
The limit is Rs 2 lakh. Receiving Rs 2 lakh or more in cash from a single person in a day, in one transaction, or for one event breaches the rule.

2. Can I pay Rs 2 lakh in cash for a car or a house?
Paying Rs 2 lakh in cash is not banned for the payer, but the person who receives it breaches the rule and faces a penalty equal to the full amount — Rs 2 lakh in this case. Use a cheque, draft or bank transfer instead.

3. Who pays the penalty if the cash limit is broken?
The receiver of the cash faces the penalty. The payer does not under this provision.

4. How much cash can I keep at home?
There is no legal limit on cash you keep at home, but you must be able to explain its source. Large deposits (Rs 10 lakh or more in a savings account in a year) are reported by banks, and withdrawals above Rs 1 crore attract TDS.

5. Does Section 269ST apply to cash gifts from family?
Yes. A cash gift of Rs 2 lakh or more from a relative breaches the cash-receipt limit, even though the gift itself may be income-tax exempt.

6. What is the new section number for Section 269ST under the Income Tax Act, 2025?
It is now Section 186. The penalty provision has become Section 451. The Rs 2 lakh limit and the 100% penalty are unchanged.

Key facts

• The Rs 2 lakh cash limit has been in force since 1 April 2017 and has not changed.
• The penalty is 100% of the amount received — the same amount as the breach.
• Banks must report cash deposits of Rs 10 lakh or more in a savings account each financial year.

Official Sources

• Income Tax Department e-filing portal — https://www.incometax.gov.in
• Income Tax Department, Government of India — https://incometaxindia.gov.in

Disclaimer: This article provides general information only and does not constitute tax advice. Please consult a qualified tax professional for advice specific to your situation.