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What happens in CK2 if your demesne is larger than the allowed size, such as 6/4 or 6/3, over a large amount of time?

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For each holding over your demesne limit you will suffer penalties:

  • Your vassals' opinion of you will drop (apparently by 10 for each holding over the limit; I experienced huge penalties myself after winning the crusade and conquering Jerusalem). I think that it takes 1/2 months before applying this penalty.
  • An income tax penalty (Wikia says -12.5% for each holding over the limit)
  • A bunch of bad events related to your holdings.

Remember that having a few more holdings is not always bad: you ensure that your vassals are under control (because you raise way more levies) and if you don't go too high, you usually make more money through direct taxes than from feudal taxes.

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    For holdings acquired in a conquest, it's more like a three month period, to give you time to distribute them among your bestest nobles and courtiers. The income penalty doesn't typically kick in unless you are grossly over the limit; one holding above the limit is typically safe, if you can live with the opinion drop.
    – mindcorrosive
    Commented Sep 2, 2013 at 7:42
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You take a penalty to your taxes collected and your vassals' opinion of you. Other bad things can happen, such as an event where robbers run rampant in your holdings, further reducing your tax income.

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