Petty cash is the small amount of cash kept at an office, shop or factory for minor expenses. Most businesses run it on the imprest method: a fixed float, say ₹10,000, is handed to one person, who records each spend with a slip or bill and is topped up to ₹10,000 each week or month.
Good practice
- One person holds it.
- Every payment has a slip, with date, purpose and who received the money.
- The float is counted at each top-up: cash in hand plus slips should equal the float.
- Expenses are posted to the right heads, such as freight, office expenses or repairs.
Limits worth knowing (as of October 2026)
- Under income tax, an expense paid in cash above ₹10,000 to one person in a day is generally disallowed, with a higher limit of ₹35,000 for payments to transporters.
- Receiving ₹2 lakh or more in cash from one person in a day, or for one transaction, is prohibited.
- GST paid on petty purchases can be claimed as credit only with a proper tax invoice in the business's GSTIN.
Why it matters
Small amounts, unrecorded, add up. ₹500 a day of unexplained spend is ₹1.8 lakh a year. A clean petty cash book also makes the audit faster.