Three cash rules, each with a 100 per cent penalty
Indian tax law treats large cash dealings harshly, and the penalties are among the steepest in the Act, equal to the entire amount involved. Three rules matter for an NRI. First, under Section 269SS you cannot accept a loan, a deposit, or an advance for the transfer of property, of ₹20,000 or more otherwise than through a cheque, bank transfer or electronic mode. Accept such a sum in cash and the penalty under Section 271D is 100 per cent of it. Second, under Section 269T you cannot repay such a loan or deposit of ₹20,000 or more in cash either, and the penalty is again the full amount. Third, Section 269ST says you cannot receive ₹2 lakh or more in cash from one person in a single day, or in respect of one transaction, or for one event or occasion, and the 100 per cent penalty here falls on the person who received the cash.
Notice how low the thresholds are. ₹20,000 for a loan, deposit or property advance, and ₹2 lakh for any cash receipt. These are not large numbers in a property deal, which is exactly why they catch people who think a small cash component is harmless.
Why this matters most on a property sale
The place an NRI is most likely to run into these rules is a property sale, where a buyer offers to pay part of the price in cash. Two limits bite at once. If the buyer pays you ₹2 lakh or more of the consideration in cash, that triggers the ₹2 lakh receipt rule, and the 100 per cent penalty lands on you as the seller who received it. And if you take a cash advance of ₹20,000 or more when agreeing the deal, that triggers the property-advance rule, with its own 100 per cent penalty. So the safe course is simple: take the entire sale price, advance and balance, through banking channels, and keep cash out of it completely.
There is a second, independent reason cash does not work for an NRI. FEMA requires your sale proceeds to move through proper banking channels and into your NRO account, and restricts large cash dealings, so even setting the tax penalties aside, a cash component is not permitted under the exchange-control rules. In practice that means cash is a non-starter twice over. A reasonable-cause defence exists for some of these penalties, but it is not something to rely on. Under the Income-tax Act, 2025 these provisions are renumbered from FY 2026-27, but they continue in the same form. A practising CA structures the sale so every rupee moves through banking channels and neither the tax penalties nor a FEMA breach is triggered.