A small subset of P2P merchants in tier-1 cities offer cash trading — meet-in-person, hand over INR, watch the USDT release. It's an old-school flow and increasingly a bad idea.
Why cash existed
Pre-UPI, cash was the only realistic medium for P2P in India. A small ecosystem of cash merchants survives in major metros, mostly serving traders who want to avoid banking-side friction.
Why cash is risky now
Banking-side AML is partly the point of avoiding cash, but cash itself triggers separate FIU reporting at the deposit/withdrawal stage. Cash deposits over ₹10 lakh in a year (₹50 lakh for cash withdrawals) are reported automatically.
Personal safety is the more immediate concern. Cash exchanges in person have a recurring history of robbery and police entrapment. The trade-off doesn't favour cash for any but the most committed corner cases.
Tax implications
Cash trades are not exempt from Section 115BBH or 194S. The trade is still a VDA transfer; tax still applies. The only thing cash 'saves' is the visibility — and given AIS auto-reporting from exchange-side data, even that's mostly illusory.
Key takeaways
- Cash P2P exists but is a small, declining segment.
- Cash deposits/withdrawals trigger separate FIU reporting above thresholds.
- Personal safety is a real concern — meet-in-person trades have robbery/entrapment history.
- Tax treatment is identical; cash doesn't reduce liability.
