Understanding Cash Deposit Limits in Saving Accounts | According to the Income Tax Act (2024)

Understanding Cash Deposit Limits in Saving Accounts | According to the Income Tax Act (2024)

Introduction:

The cash deposit limit in savings accounts defines the maximum cash amount individuals can deposit without catching the eye of tax authorities. These limits are crucial for monitoring cash flows, preventing money laundering, tax evasion, and other financial misconduct.

Cash Deposit Limits and Reporting:

Under the Indian Income Tax Act, individuals depositing INR 10 lakh or more into savings accounts during a fiscal year must notify tax authorities. 

For current account holders, this threshold rises to INR 50 lakh. While these deposits aren't immediately taxable, banks must report transactions exceeding these amounts to the Income Tax Department.

Understanding Key Sections of the Income Tax Act:

Section 269ST:

This section penalizes individuals receiving INR 2 lakh or more in cash annually. Note that this doesn't apply to bank withdrawals, but TDS deductions apply to withdrawals over the set limits.

Sections 269SS and 269T:

These sections focus on cash loans. Accepting or repaying cash loans exceeding INR 20,000 annually may result in penalties equal to the loan amount.

Section 194N:

For cash withdrawals, Section 194N dictates TDS rules. Withdrawals over INR 1 crore in a fiscal year incur a 2% TDS. Non-filers face a 2% TDS for withdrawals over INR 20 lakh and a 5% TDS for amounts above INR 1 crore.

Tax Treatment of Cash Deposits:

While deposits exceeding INR 10 lakh (for savings accounts) and INR 50 lakh (for current accounts) aren't immediately taxed, banks must report them to the Income Tax Department.

Business Deposits and Penalties:  

Business-related deposits, as declared in Sections 44AD/44ADA, are exempt from penalties. Unrelated deposits might draw tax department attention. Non-authenticated income sources can face a 60% tax, plus a 25% surcharge and a 4% cess.

Other Banking Transaction Limits:  

Cash Deposit in Current Account:

Current account deposit limits vary by bank and business activity. For example, SBI allows deposits from INR 5 lakh to INR 100 crore per month, while HDFC caps it at 60 lakh or ten times the AMB.

Cash Transaction Limits:

Cash transactions, including withdrawals, transfers, and payments, are restricted to INR 2 lakh per day by Section 269ST across all banks.

Cash Withdrawal Limits:

Large withdrawals must be reported. An individual can withdraw up to INR 3 crore from three different banks without TDS implications.

Cash Gift Limits:

  

Gifts up to INR 50,000 in a fiscal year are tax-exempt. Gifts from immediate relatives are also exempt, regardless of value.

Fixed Deposit Limits:

Tax-saving fixed deposits allow investments up to INR 1.5 lakh annually, offering potential tax benefits.

Credit Card Bill Payment Limits:

Cash payments for credit card bills are limited. For SBI, the daily limit is INR 50,000, with HDFC at INR 49,000.

Real Estate Transactions:

Real estate cash transactions are strictly regulated to prevent under-the-table deals. Cash purchases exceeding INR 20,000 are prohibited by law.

Conclusion:

Understanding the cash deposit limits and regulations under the Income Tax Act is vital for compliance and avoiding penalties. From savings to current accounts, cash gifts to real estate transactions, these guidelines ensure transparency and accountability in financial dealings.

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