The Income Tax Department has established specific cash deposit limits for savings and current accounts to prevent tax evasion, money laundering, and other financial irregularities. Exceeding these limits can lead to penalties or further scrutiny by tax authorities. Understanding these rules is essential to avoid potential issues.
Depositing cash in your savings account may seem routine, but there are restrictions that must be followed. According to income tax regulations:
Individuals can deposit a maximum of ₹1 lakh per day in a savings account.
Total cash deposits exceeding ₹10 lakh in a financial year must be reported to the Income Tax Department.
Banks are required to notify the authorities of any transactions exceeding these thresholds.
For those with current accounts, especially businesses and high-volume transaction holders, different limits apply:
The total annual cash deposit limit in a current account is ₹50 lakh.
Certain current accounts designed for manufacturers, large distributors, and service providers may have a higher monthly cash deposit limit, ranging from ₹1 crore to ₹2 crore.
If you deposit ₹50,000 or more in cash at a time, you must provide your Permanent Account Number (PAN) to the bank.
Deposits exceeding the prescribed annual limit may trigger scrutiny or an investigation by tax authorities.
The tax authorities also monitor cash withdrawals:
Withdrawals exceeding ₹1 crore from a savings account within a financial year attract 2% Tax Deducted at Source (TDS).
For individuals who have not filed Income Tax Returns (ITR) for the past three years, a 2% TDS is applied on withdrawals exceeding ₹20 lakh, and 5% on withdrawals above ₹1 crore.
Under Section 269ST of the Income Tax Act:
If an individual receives ₹2 lakh or more in cash from another person in a financial year, a penalty may be imposed.
This rule is applicable to cash deposits and not cash withdrawals from banks.
TDS provisions apply only to withdrawals exceeding certain thresholds.
Exceeding cash deposit limits can result in penalties or tax scrutiny.
PAN is mandatory for large cash deposits.
Current accounts have higher deposit limits compared to savings accounts.
Large cash withdrawals attract TDS deductions.
To stay compliant with tax regulations, individuals and businesses should consider alternative transaction methods, such as digital payments or bank transfers, for high-value transactions. Proper financial planning and adherence to these rules can help avoid penalties and unnecessary legal complications.
