Rahul Jaiswal, a resident of Bahraich district in Uttar Pradesh, was arrested with Rs five lakh 11 thousand from a bus terminus in Nepalgunj city.
He was arrested from a shop, when he was transacting the money illegally.
According to the law in Nepal, it is illegal to carry more than Rs 25,000 in Indian currency without prior permission.
Jaiswal is suspected to have been involved in illegal currency transaction in the past, police said. He has been taken into custody and legal proceedings have been initiated.