Cash memo › Cash sale limits

How much cash can a shop accept?

Cash is still common at the counter, but the Income Tax law puts limits on large cash amounts. Knowing them protects you from heavy penalties.

The ₹2 lakh rule for cash you receive

Under the Income Tax law, no one may receive ₹2,00,000 or more in cash:

• from one person in a single day, or
• for one transaction, or
• for one event or occasion, from one person.

The penalty can be equal to the whole amount received in cash. It falls on the person who receives the cash, which means you, the seller. The rule applies to every kind of business and to individuals too, with some exceptions such as banks and government.

A worked example

A furniture shop sells a bedroom set for ₹2,40,000. The customer wants to pay cash.

• Taking ₹2,40,000 in cash: not allowed.
• Making two memos of ₹1,20,000 on the same day: still not allowed, because it is one transaction from one person.
• Taking ₹1,50,000 in cash and ₹90,000 by UPI or bank transfer: allowed. The cash part is below ₹2 lakh.

Write both payments on the bill so the record is clear, for example "Paid ₹1,50,000 cash and ₹90,000 UPI".

Cash you pay out

For expenses, a business usually cannot claim a deduction for a payment of more than ₹10,000 in cash to one person in one day (the limit is ₹35,000 for payments to transporters for hiring goods carriages). Pay suppliers by UPI, cheque or bank transfer. Record any cash payment on a voucher, for example with the payment voucher maker, and keep a petty cash book for small daily spends.

Cash and GST

GST does not change because a sale is in cash. If you are registered, the same tax invoice rules apply to cash and UPI sales alike; see cash memo or tax invoice. Cash sales still count towards your turnover, including the turnover that decides whether you must register.

Good habits for cash sales

• Give a numbered cash memo for every sale, even small ones. The maker numbers them for you: CM/26-27/001 onwards.
• Count the cash at closing and match it with the day's memos.
• Deposit cash in the bank regularly, so bank entries match your sales.
• Where the customer has not paid yet, set the memo to Not paid: a UPI QR code with the exact amount prints, and the payment lands straight in your account.

Doing it in the maker

The memo has no "Paid by" line of its own, so for a sale paid partly in cash and partly by UPI, write both amounts in the notes. Every memo is kept under Saved cash memos, so at the end of the day you can open the list and add up the day's sales. For a big payment received against an earlier bill, give a proper receipt from the payment receipt maker, which records the mode, the UPI or cheque reference and the bill it settles.