Banking Guidelines: Cash Deposit and Withdrawal Limits in Savings Accounts
Managing cash transactions in a savings account requires a clear understanding of specific tax regulations. Non-compliance with these rules can lead to penalties or tax scrutiny. Awareness of these guidelines helps account holders avoid unintended legal issues.
Savings accounts are commonly linked to digital banking services such as UPI but also allow cash deposits and withdrawals. The Income Tax Act establishes limits on large cash transactions to prevent financial fraud and tax evasion.
Savings Account:
Deposits exceeding ₹10 lakh per financial year are subject to reporting to the Income Tax Department.
This monitoring system helps authorities track significant cash inflows and detect potential illegal activities.
Current Account:
For current accounts, deposits surpassing ₹50 lakh annually must also be reported to tax authorities.
While these deposits do not immediately incur taxes, financial institutions must disclose high-value transactions exceeding the specified threshold.
TDS on Large Withdrawals:
A 2% Tax Deducted at Source (TDS) applies to cash withdrawals exceeding ₹1 crore in a financial year from a savings account.
Stricter Rules for Non-ITR Filers:
If an individual has not filed an Income Tax Return (ITR) in the past three years, enhanced TDS rates apply.
2% TDS is levied on withdrawals above ₹20 lakh, while withdrawals exceeding ₹1 crore attract a 5% TDS.
Important Note: The deducted TDS under Section 194N is not considered taxable income but can be adjusted when filing the ITR.
Cash deposits amounting to ₹2 lakh or more in a financial year can result in penalties under Section 269ST of the Income Tax Act.
However, this rule only applies to deposits. Large cash withdrawals, while subject to TDS, are not penalized under this section.
These guidelines are part of the government’s effort to promote financial transparency and combat illicit activities such as money laundering and tax evasion. Understanding and following these rules can help individuals maintain compliance and avoid unnecessary legal scrutiny.
Before making significant cash transactions, consult your bank or a financial expert to understand the relevant tax laws. Following these rules ensures that your financial activities remain legally secure and free from penalties.
