Home Loan: Avoid This Mistake When Repaying Your Home Loan, or You Could Face Losses

Home Loan: Buying a home is everyone's dream, but paying off a home loan quickly is also a significant responsibility. For this reason, many people opt to repay their loans in cash; however, this approach is not always advisable.

Home Loan Cash Repayment: Building a home is a major undertaking in today's times. For the average person, purchasing a home solely on the strength of their job income can be challenging. Consequently, many people take out home loans; yet, once the loan is secured, everyone naturally desires to pay it off as quickly as possible.

It is for this reason that many individuals choose the option of making a lump-sum cash repayment. However, doing so is not always safe, as the Income Tax Department and the banking system now maintain strict vigilance over cash transactions. Therefore, if you lack the proper information, you could end up facing severe repercussions.

PAN Card Mandatory for Cash Deposits Exceeding ₹50,000

According to banking regulations, it is mandatory to provide your PAN (Permanent Account Number) when depositing cash amounting to ₹50,000 or more.
Conversely, if the cash deposit is less than ₹50,000, a PAN card is not required.

Daily Cash Limit of ₹2 Lakhs

Please note that a bank cannot accept cash amounting to ₹2 lakhs or more from a single individual in a single day.
Furthermore, if a bank violates this rule, it may face a penalty of up to 100 percent of the transaction amount.
This is the primary reason why banks often refuse to accept cash deposits exceeding ₹2 lakhs.

Annual Reporting Limit of ₹10 Lakhs

The most critical rule is that, within a single financial year, the aggregate cash deposits across all accounts held by an individual cannot exceed ₹10 lakhs.
If this limit is breached, the bank is required to report this information to the Income Tax Department via an SFT (Statement of Financial Transaction).
Subsequently, the department may initiate an inquiry into the source of the income.

What Do the Experts Advise?

Financial experts offer the following advice:

First and foremost, one should avoid depositing cash directly into the home loan account.
Instead, the cash should first be deposited into a savings account. Subsequently, the transfer should be made online from there.
This ensures that the entire transaction is recorded, and no difficulties arise while filing the ITR.