India Tax: Unexplained Cash Risks 84% Tax, 100% Penalty

• Unexplained cash, where the source cannot be proven, can lead to significant income tax and penalties, potentially reaching an effective rate of 84%.
• The 84% tax applies to unexplained income under specific sections (68, 69, 69A, 69B) and includes a 60% tax, surcharge, cess, and a 10% penalty if undisclosed.
• Large cash withdrawals (₹10 lakh+ in savings, ₹50 lakh+ in current accounts) are reported to tax authorities via SFT, and TDS applies to withdrawals exceeding ₹20 lakh or ₹1 crore based on ITR filing.
• Certain cash transactions, like receiving ₹2 lakh+ from a single person or taking/repaying loans/deposits over ₹20,000 in cash, can incur a 100% penalty.
• Taxpayers should maintain thorough documentation for all cash movements, avoid high-value cash dealings, use banking channels, and regularly check AIS/Form 26AS to prevent scrutiny.

Why It Matters: Understand India's strict cash rules to avoid heavy taxes and penalties.