Income Tax Limits on Savings Account Cash Deposits and Withdrawals Explained

Cash Transactions: Whether it's for cash deposits, withdrawals, or UPI transactions, you need savings accounts. To avoid any possible problems, it is essential to be informed of the guidelines and policies established by the Income Tax Department regarding cash transactions.

Understanding Cash Deposit Limits in Savings Accounts

There are specific limitations on the amount of money you may deposit into a savings account in a given fiscal year, as per income tax regulations. These caps are put in place to keep an eye on cash transactions and guard against illicit financial activity including tax evasion and money laundering.

• For Savings Accounts: If you deposit Rs 10 lakh or more in a financial year, the bank must inform the Income Tax Department.
• For Current Accounts: The limit is higher, with banks required to report deposits of Rs 50 lakh or more.

TDS on Large Withdrawals

The Income Tax Department has also set rules for large cash withdrawals from savings accounts:

• Withdrawals Over Rs 1 Crore: A 2% TDS (Tax Deducted at Source) will be deducted on withdrawals exceeding Rs 1 crore in a financial year.
• Non-ITR Filers: A 2% TDS is imposed on withdrawals above Rs 20 lakh and a 5% TDS is payable on withdrawals exceeding Rs 1 crore in a financial year for individuals who have not filed an Income Tax Return (ITR) for the previous three years.

Penalties for Large Cash Deposits

Penalties apply to individuals who deposit Rs 2 lakh or more in cash during a financial year, as per Section 269ST of the Income Tax Act. It's crucial to remember that although this penalty applies to deposits, it does not apply to cash withdrawals from the bank. TDS deductions, however, are necessary if withdrawals beyond the allotted amounts.

Key Points to Remember

• Income Tax Reporting: The Income Tax Department must be notified by banks for cash deposits of at least Rs 50 lakh in current accounts and at least Rs 10 lakh in savings accounts.
• TDS Deduction: A 2% TDS applies to cash withdrawals exceeding Rs 1 crore, with higher rates for non-ITR filers.
• Penalty on Cash Deposits: Depositing Rs 2 lakh or more in cash in a financial year can lead to penalties under Section 269ST.

To efficiently manage your funds and steer clear of any legal or financial complexities, it is imperative that you comprehend these guidelines and limitations. To keep your financial transactions compliant and seamless, make sure you are always up to date on the most recent laws.

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