Income Tax News: The cash deposit limit in a savings account is an important aspect under the Income Tax Act, 1961. It is designed to regulate large cash transactions and curb black money circulation. While there is no absolute restriction on how much cash can be deposited in a bank account, the Income Tax Department monitors deposits beyond specific thresholds.
1. Cash Deposit Limit in Savings Account
- Individuals can deposit any amount in their savings account.
- If the total deposits reach ₹10 lakh or more in a financial year, the bank is required to report it to the Income Tax Department.
- This reporting is done under the Annual Information Return (AIR) / Statement of Financial Transactions (SFT).
- For current accounts, this threshold is ₹50 lakh per financial year.
Deposits are not taxed immediately, but if the source of funds is unexplained or disproportionate to your income, the Income Tax Department may initiate scrutiny.
2. Cash Withdrawal Rules – Section 194N
To discourage large cash transactions, the government introduced TDS on cash withdrawals.
- If total cash withdrawals exceed ₹1 crore in a financial year, 2% TDS is deducted by the bank.
- If the individual has not filed Income Tax Returns (ITR) for the last 3 years:
- Withdrawals above ₹20 lakh attract 2% TDS.
- Withdrawals above ₹1 crore attract 5% TDS.
The TDS deducted under Section 194N is not an additional tax. It can be claimed as credit while filing the Income Tax Return (ITR).
3. Cash Receipt Rules – Section 269ST
- Receiving ₹2 lakh or more in cash in a single transaction or from one person in a financial year attracts penalty under Section 269ST.
- This penalty does not apply to cash withdrawals from banks. However, the TDS provisions of Section 194N may still apply.
Key Takeaways
Keeping proper records of the source of funds is essential to avoid scrutiny.
Savings Account Cash Deposit Limit: Above ₹10 lakh per year is reported to the Income Tax Department.
Current Account Cash Deposit Limit: Above ₹50 lakh per year is reported.
Cash Withdrawals: TDS applies if limits under Section 194N are crossed.
Cash Receipts: More than ₹2 lakh in cash attracts penalty under Section 269ST.
