Managing finances efficiently is a necessity in today’s inflation-driven world. While saving through a bank account is a common practice, it’s crucial to be aware of the rules and regulations for cash transactions. Failing to comply with these rules may lead to penalties or even legal issues. You should know about the rules to avoid any unwanted circumstances.
Cash Deposit Limits for Savings Accounts
The Income Tax Department has set specific limits for cash deposits in savings accounts to monitor financial transactions and stop illegal activities like tax evasion and money laundering.
Daily Cash Deposit Limit
You can deposit up to ₹1 lakh in cash into your savings account in a single day. Depositing amounts higher than this may require additional scrutiny.
Annual Cash Deposit Limit
If your total cash deposit exceeds ₹10 lakh in a financial year, the bank is required to report the transaction to the Income Tax Department. For current account holders, the annual limit is significantly higher, capped at ₹50 lakh.
Large Cash Deposits
For cash deposits of ₹50,000 or more, it is mandatory to provide PAN (Permanent Account Number). This helps authorities track transactions for individuals for tax and compliance purposes.
TDSon Withdrawals
As per Section 194N of the Income Tax Act, 2% TDS is applicable if you withdraw more than ₹1 crore in a financial year from your savings account. For individuals who haven’t filed their Income Tax Returns (ITR) in the last three years, the threshold is significantly lower like 2% for withdrawals above Rs 20 lakh and 5% iv withdrawals exceeding Rs 1 Crore in a year.
Under Section 269ST of the Income Tax Act, depositing ₹2 lakh or more in cash into a single account within a financial year is prohibited. Violating this rule may attract hefty penalties. However, this rule does not apply to cash withdrawals.
