Income Tax Rules: Cash Deposits in Bank Savings Accounts
Have you ever wondered how much cash you can deposit or withdraw from your bank savings account in a financial year without attracting scrutiny from income tax authorities? Personal finance experts indicate that, under income tax regulations, the total cash deposits or withdrawals in your savings account should not exceed ₹10 lakh during a fiscal year. Additionally, receiving cash amounts of ₹2 lakh or more in a single transaction or from a person on the same day is prohibited in regard to transactions tied to a single event or occasion.
If your total cash deposits exceed ₹10 lakh across all your savings accounts within the financial year (April 1–March 31), you are required to report this to the income tax department. Banks are obligated to disclose such transactions, even if they occur over multiple accounts.
Consequences of Exceeding ₹10 Lakh in Cash Deposits
Transacting beyond the ₹10 lakh threshold is flagged as a high-value transaction. Under Section 114B of the Income Tax Act, 1962, banks and financial institutions must report this to the Income Tax Department. Additionally, any deposits exceeding ₹50,000 in a single day require you to furnish your PAN (Permanent Account Number). If you do not have a PAN, you must submit Form 60 or Form 61 as an alternative,” explains Abhishek Soni, CEO and Co-founder of Tax2win.
How to Respond to an Income Tax Notice
If you receive an income tax notice concerning high-value cash transactions, it is essential to have sufficient documentation to substantiate the source of your funds. You may need to present bank statements, investment records, and inheritance documents. Consulting a knowledgeable tax advisor is advisable if you have uncertainties or concerns about revealing the sources of your cash.
Regarding cash transactions, Section 269ST stipulates that no individual may receive more than ₹2 lakh from a person in any of the following circumstances: cumulatively from a person in a single day, associated with a single transaction, or related to transactions from a person regarding a single event or occasion.