Income tax: How much cash can you deposit to prepay home loan principal without attracting I-T notice?

Income tax rules 2026: In the last few years, the Income Tax Department and various investment platforms, such as banks, mutual fund houses, and broker platforms, have been discouraging cash transactions by tightening their rules for the public at large. Nowadays, these institutions allow cash transactions up to a certain limit, and in the event of a minor violation, the Income Tax Department may issue a notice to the violator.

So, home loan borrowers planning to prepay their home loan principal using their bank savings and available cash need to know some cash transaction rules to avoid an income tax notice.

According to tax and investment experts, under Section 269ST of the Income Tax Act, home loan borrowers can deposit less than ₹50,000 in a single transaction without furnishing their PAN. However, for amounts of ₹50,000 or less, the bank would ask for the borrowers' PAN and deposit the cash into their home loan account.

One should also note that no one is allowed to receive ₹2 lakh or more in cash from a single person in a single day or for a single transaction. By doing so, the receiver would be liable for 100% penalty. Hence, the lender won't receive more than ₹2 lakh in a day into the home loan account.

Experts also noted that there is a limit on cash deposits into one's bank savings or home loan account in a single financial year. This limit is ₹10 lakh. Crossing this ₹10 lakh limit would trigger Statement of Financial Transactions (SFT) reporting by banks to the income tax department.

₹10 lakh threshold in one financial year

Speaking on the maximum threshold for home loan borrowers, Manikaran Singhal, a SEBI-registered tax and investment expert, said, “Cash deposit rule for the home loan account is the same as the bank savings account. Under the income tax rules, the maximum threshold for cash deposits in all bank accounts and home loan accounts is ₹10 lakh. This means a home loan borrower should remember that the net sum of the cash deposited in one's bank accounts and home loan account should not be more than ₹10 lakh in one financial year.”

Breaking this ₹10 lakh threshold would trigger SFT reporting by the bank to the income tax department, and the I-T department may send you an income tax notice, Singhal said.

Can you deposit ₹10 lakh in one single day?

Pointing to the single cash transaction limit, another SEBI-registered tax and investment expert, Jitendra Solanki, said, “Under Section 269ST of the Income Tax Act, a receiver can't receive more than ₹2 lakh cash in one day or one transaction. In case of a violation, the receiver will be liable for 100% of the penalty of the cash received. Hence, banks won't accept more than ₹2 lakh either in a home loan borrower's loan account or in the savings account.”

Solanki said that cash depositors need not furnish their PAN while depositing less than ₹50,000 cash. However, for a cash deposit of ₹50,000 or more into the home loan account, the depositor will have to furnish their PAN.

Is it wise to deposit cash in a home loan account?

Advising home loan borrowers to avoid depositing cash in the home loan account, Kartik Jhaveri, Director at Transcand Capital, said, “It's better to deposit cash in one's savings account and then transfer it online into one's home loan account. This will help the depositor to keep their source of income in one place, making the ITR filing easier at the end of the financial year.”

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.