Income Tax Department Tightens Rules on High-Value Cash Transactions in 2025

Introduction

In 2025, the Income Tax Department of India has intensified its monitoring of high-value cash transactions to curb tax evasion and improve transparency. Businesses, professionals, and individuals who deal in large cash amounts must now follow stricter reporting and compliance norms, or risk penalties and legal action.

What’s Changing?

The government has increased surveillance on cash-based activities across sectors, with special attention to:

• Cash deposits or withdrawals exceeding ₹20 lakh in a financial year
• Cash payments for real estate, jewellery, and luxury goods
• Large cash transactions without a valid PAN or Aadhaar

Banks and financial institutions are required to report such activities under the Statement of Financial Transactions (SFT) to the Income Tax Department.

Key Compliance Requirements

• PAN/Aadhaar Mandatory: For cash deposits or withdrawals over ₹20 lakh annually
• Form 60: Must be filed if PAN is not available
• SFT Reporting: Businesses and professionals must ensure compliance with SFT obligations if they handle cash over specified thresholds

Who is Affected?

• Small businesses and traders with cash-based sales
• Real estate agents and developers
• Jewellery and high-value retailers
• Individuals withdrawing or depositing large sums in savings or current accounts

Consequences of Non-Compliance

Failure to comply with cash transaction rules may result in:

• Penalty under Section 271DA (up to the amount received in violation)
• Scrutiny notices or tax audits
• Blocking of PAN and Aadhaar-linked services in extreme cases