Income Tax Rules: You have kept a lot of cash in your home or office, Income Tax can ask for proof, what will happen if you cannot show it?

Every day we hear news that Income Tax Department has raided a house, office, showroom or shop. In some cases, more cash than the income is seized from the house or office and in some cases a person is arrested. In such a situation, a question may arise in your mind that is it a crime to keep a large amount of cash at home? How much cash is someone allowed to keep in his house?

Experts believe that there is no provision for this in the Income Tax Act. Any person can keep as much cash as he wants in his home or office, provided that the cash or property has come from a known source and you have sufficient proof of all of them so that whenever the Income Tax Department asks for proof from you, you can present it before them.

What is the rule in income tax?

There is no specific provision in the Income Tax Act regarding how much cash a person can keep in his home or office. CA Naveen Wadhwa, Vice President of Taxmann, explains that people can keep as much cash as they want from known sources and you should have all the financial records. The important thing is that the Income Tax Act has clear provisions addressing income more than known sources of income, which are mentioned in sections 68 to 69B.

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These provisions of the Income Tax Act give the department officials the right to seek clarification from people in the case of having unaccounted wealth. If a person has a large amount of cash, then the Income Tax Department can start investigating the source of that fund, for which the person will have to provide complete proof of all the cash and property kept in his house or office.

Naveen Wadhwa says that in case sufficient evidence about the known sources of all the assets is not presented during the Income Tax Department raid, tax can be levied on the assets kept in the house or office based on the income tax bracket. In such a case, along with tax at the rate of 78% on unaccounted assets, a penalty may also have to be paid.

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Balwant Jain, Tax and Investment Expert, also explains that neither the Income Tax Act nor the RBI rules have any restrictions on the amount of cash to be kept at home or office. However, there are some things that you have to keep in mind. For example, if you are doing a business, then you should keep information about all the transactions related to your business in the cash book. People who are not doing any kind of business should also keep documents related to the source and proof of the cash or property lying with them so that when the department investigates, evidence related to the source of all the property can be easily made available.

There is a ban on gifts worth more than this amount

The property (cash) kept in the house may have been withdrawn from the bank or received from other sources such as a gift. If you claim on the inquiry of the tax department that the property has been received as a gift from someone else, then the tax laws prohibit accepting more than Rs 2 lakh for each transaction of gift, violation of which can lead to a penalty of the same amount by the Income Tax Department. In such a situation, these provisions should be kept in mind when receiving a gift in the form of cash.

(Article: Sanjeev Sinha)