Cash Transaction Limits for Kolkata Businesses: ₹2 Lakh Receipts, ₹10,000 Expenses, ₹20,000 Loans and Penalties
Cash still runs much of Kolkata’s wholesale and retail trade, from Burrabazar to Gariahat, but income tax law places firm limits on it. A business cannot receive ₹2 lakh or more in cash from one person in a day, for one transaction or one event; the penalty equals the amount received. Cash payments for expenses above ₹10,000 to one person in a day are not deductible. Loans, deposits and advances for property of ₹20,000 or more cannot be taken or repaid in cash. Large cash withdrawals above ₹1 crore a year attract TDS. Following these limits protects both your deductions and your customers.
The main cash limits
| Rule | Limit | Consequence |
|---|---|---|
| Cash receipts | Not ₹2 lakh or more from a person in a day, per transaction or per event | Penalty equal to the amount received |
| Cash expenses | Not more than ₹10,000 to a person in a day (₹35,000 for transporters) | Expense disallowed |
| Loans and deposits taken in cash | Not ₹20,000 or more | Penalty equal to the amount |
| Loans and deposits repaid in cash | Not ₹20,000 or more | Penalty equal to the amount |
| Advances for immovable property | Not ₹20,000 or more in cash | Penalty equal to the amount |
| Capital expenditure in cash | Above ₹10,000 to a person in a day | Not included in cost for depreciation |
| Donations in cash | Above ₹2,000 | No deduction |
| Health insurance premium in cash | Any amount | No deduction (preventive check-up up to ₹5,000 allowed in cash) |
What “one transaction” means
- Splitting a ₹3 lakh sale into three bills of ₹1 lakh each on the same day to the same buyer is still one transaction.
- Instalments for one sale, such as jewellery booked for a wedding paid in cash over several days, can be treated as one transaction if they relate to one bill.
- Receipts at one event, such as a wedding function, are tested together.
Exceptions
- Receipts by or from the government, banks, post offices and cooperative banks.
- Some exceptions for inter-bank transactions and for agricultural income situations.
- Cash payments in villages without bank facilities and some other specified cases for the ₹10,000 rule.
TDS on cash withdrawals
Banks deduct TDS of 2% on cash withdrawals above ₹1 crore a year from all accounts with that bank. For people who have not filed returns for the last three years, the threshold is ₹20 lakh, with higher rates above ₹1 crore. Businesses that need regular cash for wages or purchases should plan withdrawals and file returns on time to stay in the lower bracket.
PAN and reporting
- PAN is needed for cash deposits of more than ₹50,000 in a day, and for purchases of jewellery and other goods of ₹2 lakh or more.
- Banks report cash deposits of ₹10 lakh or more in savings accounts and ₹50 lakh in current accounts; see our guide on income tax notices for cash deposits.
GST connection
Cash sales must be invoiced and reported like any other sale. Cash sales not shown in GST returns but deposited in the bank are a common basis for both GST and income tax notices.
Practical steps for Kolkata traders
- Accept UPI, cards and bank transfers for large sales; display the QR code at the counter.
- Pay suppliers, contractors and staff above the limits by bank.
- Do not take hand loans from relatives or friends in cash above ₹20,000; use bank transfers and a simple loan confirmation.
- Keep a daily cash book reconciled with deposits.
- Use the presumptive scheme benefits for digital receipts: under section 44AD, 6% instead of 8% on digital receipts, and higher turnover limits when cash is within 5%.
Example: a wedding jewellery order
A family pays a Bowbazar jeweller ₹1.8 lakh in cash on Monday and ₹1.5 lakh in cash on Thursday for one wedding set billed as a single invoice. Although each payment is below ₹2 lakh, both relate to one transaction, so the jeweller has received ₹3.3 lakh in cash for one transaction and is exposed to a penalty equal to the amount. The fix is to take the second instalment by UPI or bank transfer.
Example: paying a contractor
A Howrah factory pays a fabrication contractor ₹45,000 in cash in one day. The entire ₹45,000 is disallowed as an expense, not just the amount above ₹10,000. Paying through the bank avoids the disallowance and also gives a clean record for TDS.
Quick reference for shop staff
Print a simple card for the counter: no cash of ₹2 lakh or more for one bill or one customer in a day; ask for PAN for sales of ₹2 lakh or more; take UPI or card for large amounts; issue a bill for every sale. Training staff avoids most penalty cases, which usually arise from well-meaning customer service at the counter.
FAQs
Can a shop in Kolkata accept ₹2 lakh cash for one sale?
No. Receiving ₹2 lakh or more in cash for one transaction attracts a penalty equal to the amount.
What is the cash payment limit for business expenses?
₹10,000 to one person in a day; ₹35,000 for payments to transporters.
Can I repay a loan in cash?
Not if the amount is ₹20,000 or more.
Is TDS deducted on cash withdrawals?
Yes, at 2% on withdrawals above ₹1 crore a year from one bank, with lower thresholds for non-filers.
Does the ₹2 lakh cash limit apply to a doctor or a school?
Yes. It applies to any person receiving cash, not only traders, with limited exceptions for government and banks.
TAXAJ reviews cash practices, books and returns for traders and businesses across Kolkata. Talk to our Kolkata team.
Last updated 11 November 2026. Sources: Income-tax law provisions on restriction of cash receipts, disallowance of cash expenditure, acceptance and repayment of loans and deposits in cash, deductions for donations and health insurance, TDS on cash withdrawals and PAN quoting rules, and the related penalties. General information only.
