Cash payment for property purchase is not restricted in India — it is effectively prohibited. A seller who accepts ₹20,000 or more in cash as an advance, or ₹2 lakh or more in cash for the deal, faces a penalty equal to every rupee received. Here are the four provisions that do it, a ₹10 crore worked example of what the “cash component” really saves and risks, how it gets caught in 2026, and how a clean South Delhi deal is actually paid.
Almost none. Two provisions of the Income-tax Act close the door from both sides. Section 269SS (now Section 185 of the Income-tax Act, 2025) bars anyone from accepting an advance of ₹20,000 or more in cash in relation to the transfer of immovable property — whether or not the sale goes through. Section 269ST (now Section 186) bars anyone from receiving ₹2 lakh or more in cash in a single transaction, from one person in a day, or for one event — and a property sale is one transaction, so instalments do not help. The penalty in each case is 100% of the cash received, on the recipient, under Sections 271D and 271DA. Add the 1% TDS the buyer must deduct on the full price, the sub-registrar’s reporting of every deal above ₹30 lakh, and the Supreme Court’s April 2025 direction that registration offices report any cash of ₹2 lakh or more to the tax department, and the position is simple: a South Delhi property is paid for through a bank, in full, or not at all.
We are asked about the “cash component” less every year, and this guide is the answer we give when we are. It is not a lecture. It is a costing: what the cash portion of a deal is supposed to save each side, what it exposes each side to, and why, in 2026, the arithmetic has stopped working even for people who were never going to be caught. If you want the tax rules for the deal itself, they sit in our guides to TDS on purchase, capital gains and stamp duty; this one is about the part of the price that never used to reach the deed.
The restrictions are on the person who receives the cash — the seller, usually — which is why sellers are the ones who should read this table twice. The buyer is not penalised under these sections, but is exposed under a different one, which the worked example below explains.
| Provision | What it prohibits | Threshold | Consequence |
|---|---|---|---|
| Section 269SS (new Section 185) | Accepting a loan, deposit or a “specified sum” — any advance for the transfer of immovable property — other than by account-payee cheque, draft or electronic transfer | ₹20,000 or more (aggregate with the same person) | Penalty equal to the amount, under Section 271D, levied by the Joint Commissioner; relief only for proven reasonable cause |
| Section 269T (new Section 188) | Repaying such an advance in cash — so refunding a cash token in cash is a second offence | ₹20,000 or more | Penalty equal to the amount, under Section 271E |
| Section 269ST (new Section 186) | Receiving cash in aggregate from a person in a day, in a single transaction, or for one event or occasion | ₹2 lakh or more | Penalty equal to the amount, under Section 271DA, on the recipient |
| Sections 50C, 43CA and 56(2)(x) (new Sections 78, 53 and 92) | Declaring a price more than 10% below the circle-rate value | 10% tolerance band | Seller taxed on circle value as deemed consideration; buyer taxed on the shortfall as income — the undervaluation trap in our circle rate guide |
Read together, the first three provisions leave no lawful room for a cash payment for property purchase. The advance limb bites at ₹20,000, so even the customary cash token is a violation the moment it reaches that figure. The receipt limb bites at ₹2 lakh per transaction, and the Income-tax Department’s own guidance treats a sale as a single transaction however many instalments it is split into. The penalties are not a percentage of tax; they are a percentage of the cash, and that percentage is one hundred.
In RBANMS Educational Institution v. B. Gunashekar, a buyer sued to protect a claimed ₹9 crore agreement on which he said he had paid ₹75 lakh in cash. The court threw the suit out and, noting that such payments openly violate Section 269ST, directed that courts must inform the tax department whenever a pleading claims cash of ₹2 lakh or more, that sub-registrars must report any document recording cash of ₹2 lakh or more, and that officers who fail to report face disciplinary action through the state’s Chief Secretary. A cash payment that reaches any piece of paper is now a self-reported offence.
To see what a cash payment for property purchase actually buys, take a South Delhi floor that changes hands at ₹10 crore, with the parties agreeing to register at ₹8 crore and pass ₹2 crore outside the deed. Here is what each side is supposed to gain, and what each side actually carries:
| Seller | Buyer | |
|---|---|---|
| The supposed saving | Long-term capital gains tax on ₹2 crore at 12.5% — about ₹25 lakh plus surcharge and cess | Stamps and registration on ₹2 crore at 6–9% — ₹12–18 lakh |
| The statutory exposure | Penalty of ₹2 crore under Section 271DA (100% of cash received); the ₹2 crore taxed as income anyway once found; prosecution risk | The ₹2 crore treated as unexplained investment (old Section 69, new Section 103) unless its source is proven — taxed at 60% plus surcharge and cess, roughly 78%, with no deductions |
| The certain cost, even if never caught | — | Cost of acquisition on paper is ₹8 crore, not ₹10 crore. At resale the taxable gain is ₹2 crore higher: 12.5% of that is ₹25 lakh of extra tax, on money already spent |
| The collateral cost | Cannot deposit or use the cash without explaining it; deposits above ₹10 lakh a year are reported by the bank | Home loan sanctioned only against the registered value; the cash portion is self-funded and invisible to the lender |
Look at the buyer’s row. The stamp duty saved is ₹12–18 lakh; the extra capital gains tax at resale is ₹25 lakh, and that is before any penalty or investigation. The buyer who pays cash is not saving; he is borrowing against his own future sale at a bad rate and taking on unexplained-investment risk to do it. The seller’s ₹25 lakh saving is set against a ₹2 crore penalty, an eight-to-one bet on never being noticed — and the next section is about why that bet has stopped paying.
The cash portion is the part of the deal no one can defend later — not the seller in a penalty notice, not the buyer at resale. We don’t do it, and the market has stopped needing it.
The old assumption was that a cash component was invisible unless someone talked. Four data flows now run whether anyone talks or not.
Every registration of immovable property worth ₹30 lakh or more is reported to the tax department in the registrar’s annual statement of financial transactions, and appears in both parties’ Annual Information Statement. The registered value, the names and the PANs are on file before the deed is delivered.
The buyer’s 1% deduction under Section 194-IA is filed against the seller’s PAN with the consideration stated on Form 26QB. A consideration that does not match the registered value, the loan sanction or the seller’s capital-gains return is a mismatch the system flags automatically.
Cash deposits of ₹10 lakh or more in a year in savings accounts are reported by banks; large cash withdrawals draw TDS of their own. A seller cannot bank the cash without explaining it, and a buyer cannot withdraw it without a record.
A receipt, an agreement recital, a WhatsApp message, a broker’s ledger, a suit when the deal sours — after the Supreme Court’s April 2025 direction, every court and registration office that sees a cash figure of ₹2 lakh or more is required to pass it to the tax department. The deals that are caught are usually caught by their own documents.
There is also a quieter reason the cash component has faded from South Delhi. Delhi’s circle rates were last revised in 2014 and sit well below market in the good colonies, so there was never a need to under-declare to avoid a circle-rate penalty; the duty was always payable on the real price. And the buyers of ₹10–30 crore floors today are professionals, listed-company promoters and NRIs whose money is banked by definition and whose lenders require a registered value that supports the loan. The white deal is not a moral choice any more; it is the only one that clears a bank, a CA and a registry.
Strictly, a cash payment for property purchase below ₹20,000 as a token does not breach Section 269SS, and a stray cash payment below ₹2 lakh does not breach Section 269ST. Neither is worth the ambiguity, and we advise against both: the customary token in a South Delhi deal is now a bank transfer against a receipt, and the rules on token money are cleaner when every rupee has a narration. Two side-payments deserve a warning. Brokerage is a receipt like any other, so commission of ₹2 lakh or more paid in cash puts the broker in breach; a professional brokerage invoices it with GST. And a “separate” payment for furniture or fittings is lawful only if it is genuinely for furniture, separately invoiced and paid through the bank — used to park part of the price, it is the same cash component with a different label.
| Stage | Payment | Discipline |
|---|---|---|
| Token | Bank transfer or account-payee cheque against a signed receipt | Narration on the transfer; the receipt states the property, the price and the refund terms |
| Agreement to sell | Typically 10% of the price, less the token, through the bank | Full price stated; TDS of 1% on each instalment deposited via Form 26QB within the deadline |
| Loan disbursement | Lender pays the seller directly against the registered value | A sanction letter at the true price is the buyer’s best evidence of a white deal |
| Balance at registry | RTGS or banker’s cheque before the sub-registrar | Deed recites the full consideration and the mode of every payment |
The document chain that makes this work — agreement, diligence, deed — is the one described in our guide to sale deeds and agreements to sell, and the full cost stack of a white deal, every charge on one table, is in the all-in cost guide. A buyer paying the full price through the bank also gets something the cash buyer never does: a cost of acquisition that matches what was actually paid, which is worth exactly 12.5% of the difference on the day the floor is sold again.
We do not take or arrange any cash payment for property purchase: every SouthDelhiFloors transaction is paid through the bank, invoiced with GST and registered at the real price. If that is how you want to buy or sell, we should talk.
Provisions summarised as in force for FY 2026-27 under the Income-tax Act, 2025, with the familiar 1961 references: Sections 269SS, 269T and 269ST (new Sections 185, 188 and 186) and the corresponding penalties in Sections 271D, 271E and 271DA; Sections 50C, 43CA and 56(2)(x) with the 10% tolerance band; Section 69 and the 60% rate on unexplained investments; registrar reporting of transactions of ₹30 lakh and above and bank reporting of cash deposits under the statement-of-financial-transactions rules. Case law: RBANMS Educational Institution v. B. Gunashekar, Supreme Court, 16 April 2025. Read the text of Section 269ST at incometaxindia.gov.in, and take professional tax advice before any transaction.
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