With the stock market witnessing a bloodbath and bank interest rates hitting rock bottom, many Indians are shifting back to the age-old habit of keeping liquid cash at home. While holding cash might give you a sense of security in uncertain times, it is essential to stay compliant with the Income Tax Department’s regulations to avoid losing your hard-earned savings to fines or legal action.

Under current Indian laws, there is no specific limit on how much cash an individual can keep at home. However, the catch lies in the “Source of Income.” If the Income Tax Department conducts a search and finds a large amount of cash, you must be able to provide documented proof of where that money came from. Failure to provide a valid explanation or missing tax documents for the seized cash can attract a staggering penalty of up to 137% of the total amount.

Furthermore, there are strict caps on cash transactions. Any cash transaction exceeding ₹20,000 for loans or deposits is illegal, and spending more than ₹2 lakh in cash for a single purchase requires mandatory PAN and Aadhaar details. Additionally, depositing more than ₹20 lakh in a bank account within a single financial year is reported to the tax authorities. While market volatility makes cash seem attractive, experts suggest keeping digital records of all major income to ensure your domestic savings don’t become a legal nightmare.