By CA Surekha S Ahuja
Cash is legal only when it’s limited, documented, and traceable — the rules haven’t changed, but AI and SFT make every transaction accountable.
Why Social Media “Halla-Gulla”?
Despite social media frenzy, the laws themselves are not new:
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Key provisions: Sections 269ST, 269SS/269T, 194N, 68, 69, 69A, 115BBE, and SFT reporting predate 2025.
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No legislative changes were introduced in FY 2025–26.
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Hype arises from AI-enabled enforcement, SFT-triggered notices, and high-visibility penalties, making existing rules appear stricter.
Insight: Understanding past, present, and forward-looking compliance strategy is essential to avoid risk.
Legacy Rules & Key Thresholds
| Section / Rule | Limit / Trigger | Allowed / Disallowed | Effective Date | Notes |
|---|---|---|---|---|
| Sections 68 / 69 / 69A / 115BBE | Unexplained cash, unrecorded investments | Cash allowed if source documented; disallowed if unexplained | 01-Apr-2017 | Penalty up to 84% for unexplained deposits; AI/SFT triggers notices |
| Section 269ST | Cash receipt ≥ ₹2,00,000/day or transaction | Disallowed beyond limit; allowed if < ₹2L | 01-Apr-2018 | Applies per person per day / transaction / occasion; penalty equal to cash received |
| Sections 269SS / 269T | Cash loan / repayment ≥ ₹20,000 | Disallowed above limit; allowed below | 1984 / 1989 | Requires formal agreement, PAN, repayment documentation |
| Section 194N | Cash withdrawal > ₹20,00,000 if ITR not filed 3 yrs | TDS triggers; allowed if ITR filed | 01-Sep-2019 | Filing ITR avoids TDS; auditors should verify compliance |
| SFT Reporting (285BA / Rule 114E) | Savings deposit > ₹10L, property > ₹30L, FDs > ₹10L | Mandatory reporting; non-reporting triggers notice | Progressive, FY 2022–23 onwards | AI matches PAN, triggers automatic notices |
Allowed Cash Transactions — Permitted under the Act
| Transaction Type | Limit | Conditions | Reference / Notes |
|---|---|---|---|
| Business expenses / supplier payments | ≤ ₹10,000/person/day | Maintain invoices; allowed for deduction; above limit, deduction disallowed | Sec 40A(3) |
| Cash loans / repayments | ≤ ₹20,000/transaction | PAN verification, agreement, repayment schedule required | Sec 269SS / 269T |
| Cash receipts from a person | < ₹2,00,000/day/transaction/occasion | Allowed if below threshold | Sec 269ST |
| Salary / wages | No explicit cash limit | Bank transfer preferred for traceability; above ₹20,000, maintain records | Sec 192 |
| Rent payments | ≤ ₹1,00,000/month cash | Exempt from TDS under 194-IB if within limit | Sec 194-IB |
| Medical reimbursements / professional fees / incidental expenses | ≤ ₹10,000/person/day | Proper bills/invoices; maintain records | Sec 269ST / Rule 114E |
Insight: Limits differ per purpose; documentation and digital transactions preferred to reduce risk of notices or penalties.
High-Risk & Trigger Points
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Savings account deposits > ₹10L/year → triggers SFT
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Daily cash receipts ≥ ₹2L → 269ST penalties
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Cash loans > ₹20,000 → Sections 269SS/269T penalties
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Property transactions > ₹20,000 in cash → SFT / 269ST triggers
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Non-filing of ITR → 194N TDS on withdrawals > ₹20L
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Unexplained cash detected by AI / SFT → 115BBE + penalty
Auditor Role: Verify all cash-intensive transactions, reconcile with ITR & SFT, validate sources, ensure documentation.
AI & SFT Enforcement — Reality vs Social Media Myths
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AI Monitoring: Detects unusual patterns across PAN, bank, property, FDs, mutual funds
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SFT Expansion: Routine high-value transactions flagged automatically
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Automatic Notices & Penalties: 115BBE / 269ST / 269SS / 269T triggers
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Social Media Myths vs Reality
| Claim | Reality |
|---|---|
| “New rules in 2025” | No new law; enforcement visibility increased |
| “All cash deposits taxed 84%” | Only unexplained cash under Sections 68–69A / 115BBE |
| “ITD targets small taxpayers” | Primarily high-value transactions flagged by SFT / AI |
| “Social media tips suffice” | Professional guidance and documentation essential |
Extended ITR Timeline — Strategic Importance
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Four-year scrutiny ensures multi-year verification of transactions
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Deterrence effect: discourages non-compliance
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Auditor Role: Reconcile 4 years of cash deposits, loans, and property, validate sources, and provide advisory for mitigation
Compliance & Strategic Action — FY 2025–26
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Digitize transactions → NEFT, RTGS, UPI for amounts > ₹20k
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Document loans & advances → Agreements, PAN, repayment schedule
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Track SFT triggers → Maintain internal dashboards
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Maintain multi-year records → Reconcile past 4 years for ITR/SFT alignment
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Timely ITR filing → Avoid 194N TDS and AI/SFT notices
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Audit verification → Review cash-intensive operations and high-risk transactions
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Proactive advisory → Educate clients about AI, SFT, and cash handling limits
Key Takeaways
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Hype ≠ new law; enforcement visibility and penalties have increased
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Intent remains: transparency, compliance, black money prevention
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Auditor & CA roles critical: verification, documentation, advisory
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Strategic compliance: digitize, formalize, document, reconcile, and file ITR timely
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Board-level awareness: implement structured internal controls and compliance workflows
Bottom Line: FY 2025–26 is where long-standing cash rules intersect with AI-powered enforcement, making it essential to understand thresholds, allowed/disallowed transactions, trigger points, and strategic compliance steps to mitigate penalties and reputational risk.
