Can I pay for a property purchase in cash, and what are the legal limits?

Question

The seller wants part of the sale consideration in cash. I want to know the legal limit on cash payments for property transactions. I would like to understand which provision governs this, what it entitles me to, and how long I have before the remedy lapses. I also want to know whether I need a lawyer for this or can do it myself.

MyVakeel Legal Desk · Accepted Answer

In India, the answer to "Can I pay for a property purchase in cash, and what are the legal limits?" turns on Income Tax Act 1961, Section 269SS, Income Tax Act 1961, Section 269ST and Income Tax Act 1961, Section 271D. The points below set out the position and then what to do about it, in the order it should be done.

Section 269SS prohibits accepting a loan, deposit or any sum in relation to transfer of immovable property of Rs.20,000 or more otherwise than by account payee cheque, draft or electronic means, even if the transaction is later called off.

Section 269ST separately bars any person from receiving Rs.2 lakh or more in cash in aggregate from a single person in a day or in respect of a single transaction, which squarely covers most property sale consideration payments.

A seller who receives cash in violation of these provisions can be penalised under Section 271D with a penalty equal to the amount received in cash, regardless of whether tax was otherwise paid on the transaction.

Buyers and sellers should route all consideration, including advance and token amounts above the threshold, through banking channels to avoid penalty exposure and to support the transaction value shown in the sale deed.

Cash transactions above the prescribed limits can also trigger scrutiny by tax authorities and raise questions about the genuineness of the sale consideration during later capital gains assessment.

Practical steps: 1) Route all payments above Rs.20,000 through cheque, RTGS or other banking channels; 2) Avoid cash receipts of Rs.2 lakh or more in a single property transaction; 3) Retain bank statements and payment proofs matching the consideration recorded in the sale deed; 4) Consult a tax advisor if cash has already been received to assess penalty exposure.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — remedies under Income Tax Act 1961, Section 269SS carry limitation periods, and unexplained delay weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in property law.