How Much Cash Can Go Into a Property Deal? The 269SS and 269ST Limits

Suppose a seller says the price is Rs. 90 Lakhs, with Rs. 10 Lakhs to be handed over in cash. That single request breaks at least one tax rule and puts the buyer at risk. Here is how the cash limits work in a property deal, what happens when they are crossed, and how a buyer in Bangalore can pay with a complete record.

What the Law Says About Cash

The Income-tax Act has long restricted cash in property transfers, and the policy is simple: big money should leave a bank trail. Three provisions apply to a home purchase:

• Advance: a seller may not take at least Rs. 20,000 in cash towards a property transfer (Section 269SS)
• Receipts: cash received from a single person must stay under Rs. 2 Lakhs for the day, the transaction and the event (Section 269ST)
• Refunds: returning such an advance also has to go through a bank (Section 269T)

A fresh Income-tax Act has applied since 1 April 2026, with the same limits at sections 185, 186 and 188. This guide uses the older numbers because they are still the ones people say aloud.

Reading the Advance Rule Closely

Any sum paid in connection with a property transfer is covered, from a small token to a large booking amount. The rule holds even when the sale is cancelled later. It was extended to property advances in June 2015.

Reading the Receipt Rule Closely

This is the broader limit. Instalments, the final balance and a separate cash demand for fittings or parking fall under it. Breaking a payment into pieces across several days achieves nothing, as the limit also tracks each transaction and each event.

Which Payments Fall Outside

Money paid into a government account, a bank or a post office is outside the receipt limit. That is why the state's stamp duty and registration dues have their own online system.

All other large amounts need a bank channel. Account payee cheques, demand drafts, NEFT, RTGS, IMPS, UPI, net banking and card payments all qualify.

What Happens When the Rules Are Broken

A penalty lands on whoever accepted the cash, in a sum equal to the cash. Rs. 4 Lakhs taken in notes means a possible penalty of Rs. 4 Lakhs. For a cash refund, the person making the refund pays.

The one exception needs the receiver to prove reasonable cause. In practice that is a hard case to make for a payment that was arranged in advance.

The Buyer Is Not Off the Hook

Paying cash exposes a buyer in at least three ways. They are set out below:

• Weak evidence: in a title dispute, a cancelled booking or a refund claim, a loose receipt counts for little next to a bank entry
• Higher tax on a future sale: the cost used to compute capital gains is the price in the deed, so an understated price leaves a larger gain
• Source-of-funds queries: sub-registrars report registrations worth Rs. 30 Lakhs and above, and untraceable cash may be taxed heavily as unexplained money

Understating the Price Does Not Pay

Many cash requests come with a promise of a smaller number in the deed. Karnataka takes stamp duty on the bigger of guidance value and deal price, so duty savings tend to be small.

The tax department has a second net. When the stamp duty value is over 10% above the price paid, the difference can be taxed in the buyer's hands, and the seller's sale value is lifted to match.

Advice for New-Launch Buyers

A RERA-registered project holds buyer funds in a designated account, and the state RERA portal warns buyers to pay that account and no other. Cash given to a sales executive may not get there. A buyer could then struggle to prove the payment if the project slips.

Home loan lenders insist on the paper trail too. They pay the developer in stages and want the borrower's contribution transferred and receipted. Cash beyond the agreement value cannot be financed.

Putting the Rules to Work

Suppose a seller asks for Rs. 50,000 in cash as a token. That request already crosses the Rs. 20,000 advance limit, so the buyer should offer a cheque or a transfer instead. If the seller insists on notes, the buyer should read it as a warning about how the rest of the deal will be run.

The same test applies at later stages. A demand for Rs. 2.5 Lakhs in cash for fittings is above the Rs. 2 Lakh receipt limit, and spreading it over three days changes nothing. The safe course is to have the full amount written into the agreement and paid through a bank.

Quick Checklist

A buyer can follow these steps from booking to registration:

• Use cheques, drafts or transfers for every payment, however small the instalment
• Reconcile each receipt with the bank statement
• Pay a launch only into the account named in the agreement and shown on the RERA record
• See that the sale deed states the full price
• Ask questions, or step back, if a cash component is pressed on the buyer
• Get a chartered accountant's view on current section numbers

Need help with the paperwork for a flat or plot? Speak to us, and we will link buyers with lenders and advisers who handle property purchases routinely.