Individuals from diverse backgrounds, including those with fixed salaries, are generally encouraged to maintain at least one savings account to fulfill their banking requirements. Many individuals also opt to hold multiple accounts for various purposes. Those with a consistent income typically establish a savings bank account as it provides a secure location for their funds while also allowing them to earn interest on their deposits.
Nevertheless, although there is typically no cap on the amount that can be deposited into a savings account, have you ever considered the maximum amount you can deposit and withdraw within a financial year to remain below the tax authorities’ scrutiny?
At the outset, it would be imperative to highlight that the Government has, in its endeavour to provide the requisite impetus to transactions through banking channels and other accepte electronic modes, put in place various measures to curb cash transactions which are purported to fuel the parallel black economy. Some banks may also have certain restrictions based on the type of account being operated by an individual.
The Reserve Bank of India (RBI) requires banks to report cash deposits and withdrawals of Rs 10 lakh or more to their controlling offices. Depositing an amount exceeding Rs 10 lakh in a single or combined financial year also draws the attention of the Income Tax Department (ITD).
“Cash deposit exceeding Rs 10 lakh during a financial year (from April 01 to March 31) across a person’s savings accounts is reported to the Income Tax Department. Banks are required by the Central Board of Direct Taxes (CBDT) to flag such transactions, even if the deposit is distributed among multiple accounts. Further, every person entering into above transactions must mandatorily quote their PAN or Aadhaar in the documents pertaining to such transactions. For a deposit exceeding Rs 50,000 in cash, PAN number is to be quoted mandatorily as per Income Tax Rules,” informs Manmeet Kaur, Partner, Karanjawala & Co.
Tha fact is every deposit into any bank account can be scrutinised by the tax authorities for ascertaining the source thereof.
“Under the extant provisions of the Income Tax Act and corresponding Income tax Rules, PAN is mandated to quoted at the time of undertaking certain prescribed transactions including, inter-alia, opening an account (other than Basic Savings Bank Deposit Account) with a banking company, cash deposits with banks exceeding Rs 50,0000. Further, it is mandatory for the banks to furnish the Statement of Financial Transactions (SFT) to the Income Tax Department reporting cash deposits of Rs 10 lakh or more in a savings account during a fiscal year,” says Amit Gupta, Partner at Saraf and Partners.
It is essential to recognize that although the very deposit of cash in itself doesn’t not entail immediate taxation, “but deposits which cannot be corroborated with a genuine disclosed / taxed source would expose the taxpayers making such deposits to rigours of anti-abuse provisions entailing added income tax exposures penal consequences,” adds Gupta.
As far as cash transactions go, Section 269ST prohibits any person to receive an amount of Rs 2 lakh and above in cash: in aggregate from a person in a day, or in a single transaction, or in respect of transactions relating to one event or occasion from a person.