Cash Deposit Limit in Saving Account as Per Income Tax

 

Cash Deposit Limit in Saving Account as Per Income Tax

The cash deposit limit in savings accounts refers to the maximum amount of cash that an individual can deposit within a specified period without attracting the attention of tax authorities. This limit is set by income tax regulations to monitor and regulate the flow of cash transactions, curbing the potential for money laundering, tax evasion, and other illicit financial activities.

Income tax filing

As per the provisions outlined in the Indian Income Tax Act, there are specific regulations concerning cash transactions, including significant cash deposits. Individuals who deposit cash into a savings account and accumulate INR 10 lakh or more during a fiscal year are required to notify the tax authorities. For those holding current accounts

, this reporting threshold is elevated to INR 50 lakh.

How is the Cash Deposited in a Bank Account Taxed?

As per the provisions outlined in the Indian Income Tax Act, there are specific regulations concerning cash transactions, including significant cash deposits. Individuals who deposit cash into a savings account and accumulate INR 10 lakh or more during a fiscal year are required to notify the tax authorities. For those holding current accounts, this reporting threshold is elevated to INR 50 lakh. It’s essential to recognize that although these deposits aren’t subject to immediate taxation, financial institutions are obligated to report transactions that exceed these limits to the Income Tax Department.

Cash Transaction Limit

Apart from cash deposits, there are also cash transaction limits in place to regulate other types of financial activities. These limits are designed to track and monitor transactions that involve substantial amounts of cash. These transactions can include cash withdrawals, transfers, and payments. Cash transactions are restricted by Section 269ST and can only be up to INR 2 Lakh per day. All the banks have cash transactions below this value.

Cash Withdrawal Limit

Cash withdrawal limits exist to ensure that large cash withdrawals are reported to the relevant authorities. While these limits can vary between banks and account types, they are generally put in place to prevent illegal activities such as money laundering and tax evasion.

Should an individual possess three distinct bank accounts across three separate banks, they could potentially withdraw a cumulative amount of INR 1 crore from each bank, summing up to a total withdrawal of INR 3 crore, without incurring any TDS implications.

Section 194N

Turning to cash withdrawals, the rules for tax deducted at source (TDS) are outlined in Section 194N of the Indian Income Tax Act. The law dictates that withdrawals exceeding INR 1 crore within a fiscal year incur a 2% TDS. For individuals who haven’t filed their income tax returns for the past three years, a 2% TDS applies to cash withdrawals exceeding INR 20 lakh, while a 5% TDS applies to amounts withdrawn above INR 1 cr in the same financial year