Understanding Income Tax Regulations for Savings Accounts

Many people wonder how much cash they can deposit into their savings account without attracting the attention of the Income Tax Department. According to tax regulations, the total amount of cash deposits or withdrawals in a savings account within a financial year should not exceed ₹10 lakh. If this threshold is crossed, it may prompt an inquiry from the tax authorities.

Daily Cash Transaction Limits

Another common concern is how much cash can be transacted in a single day. Section 269ST of the Income Tax Act states that no individual can withdraw more than ₹2 lakh in cash per transaction or through linked transactions in a single day. Additionally, if the total cash deposits across all savings accounts exceed ₹10 lakh in a financial year, banks are required to report the transactions to the Income Tax Department, regardless of whether the deposits are spread across multiple accounts.

What Happens if You Exceed the ₹10 Lakh Limit?

Depositing more than ₹10 lakh in cash within a financial year is considered a high-value transaction. Under Section 114B of the Income Tax Act, banks and financial institutions must notify the Income Tax Department about such transactions. Moreover, if a cash deposit exceeds ₹50,000 in a single day, the depositor must provide their PAN (Permanent Account Number). If they do not have a PAN, they are required to submit Form 60/61 as an alternative.

How to Respond to an Income Tax Notice for High-Value Transactions

If the Income Tax Department sends a notice regarding high-value cash transactions, you must provide sufficient proof to justify the source of the funds. Acceptable documents include:

• Bank statements
• Investment records
• Documents related to inheritance

For individuals unsure about their cash sources or how to respond, consulting a tax advisor is highly recommended.

Key Takeaways:

✅ Cash deposits or withdrawals exceeding ₹10 lakh in a financial year may lead to Income Tax scrutiny.
✅ Daily cash withdrawals of ₹2 lakh or more are not permitted under Section 269ST.
✅ Deposits exceeding ₹10 lakh annually are classified as high-value transactions and must be reported to the Income Tax Department.
✅ A cash deposit of ₹50,000 or more in a day requires the submission of a PAN number.
✅ If you receive an Income Tax notice, ensure you have proper documentation to explain the source of funds.