Cash Deposits and Withdrawals: How Much Can You Keep in Your Savings Account?

Many individuals wonder how much cash they can safely keep in their savings accounts without triggering scrutiny from the Income Tax Department. Under the Income Tax Act, there are specific limits on cash transactions that can raise a red flag if exceeded. Let’s take a look at these rules, which every taxpayer should be aware of to avoid unnecessary tax notices.

The Rs 10 Lakh Limit: Annual Threshold for Cash Deposits

According to income tax regulations, the total cash deposit or withdrawal in a savings account during a financial year should not exceed Rs 10 lakh. If this threshold is crossed, it can attract scrutiny from the Income Tax Department. This is the total amount deposited or withdrawn across all accounts in your name, so it’s important to keep track of your transactions to stay within the limit.

Daily Cash Transaction Limits

Another question commonly asked is about the daily cash transaction limits. Under Section 269ST of the Income Tax Act, you cannot receive more than Rs 2 lakh in cash in a single transaction or in linked transactions on the same day. This rule is designed to curb large-scale unreported cash transactions, which are often used for illicit activities.

What Happens If You Exceed the Rs 10 Lakh Limit?

Exceeding Rs 10 lakh in cash deposits in a financial year constitutes a high-value transaction. In such cases, banks and financial institutions are legally required to report these transactions to the Income Tax Department. Additionally, if you deposit Rs 50,000 or more in cash in a single day, you must provide your PAN (Permanent Account Number). If you do not have a PAN, you must submit Form 60/61 as an alternative.

These measures are in place to monitor large-scale cash movements and ensure they are legitimate.

How to Handle an Income Tax Notice for High-Value Transactions

If you have exceeded cash deposit limits and receive an Income Tax notice, it’s essential to have sufficient evidence to explain the source of the funds. Documentation can include:

• Bank statements
• Investment records
• Inheritance documents
  Providing clear and legitimate proof of the funds’ source will help you respond to the notice effectively. If you are unsure about the source or the proper way to respond, it’s advisable to consult a tax advisor for guidance.

Key Takeaways

• Cash deposits or withdrawals in a savings account should not exceed Rs 10 lakh in a financial year to avoid tax scrutiny.
• Daily cash transactions of Rs 2 lakh or more are not allowed under Section 269ST of the Income Tax Act.
• High-value transactions over Rs 10 lakh in a year must be reported to the Income Tax Department.
• A PAN is required for cash deposits of Rs 50,000 or more in a day.
• If you receive an Income Tax notice, make sure to provide documentation explaining the source of your funds.

The Upcoming IPOs in this week and coming weeks are NACDAC Infrastructure, Transrail Lighting, Mamata Machinery, Identical Brain Studios, Rosmerta Digital, Indo Farm, DAM Capital and Avanse Financial.

The Current active IPO is and International Gemmological, Hamps Bio, Yash Highvoltage and Inventurus Knowledge.

For more details on upcoming IPOs, you can visit our page at Best IPO to Apply Now - IPO List 2024, Latest IPO, Upcoming IPO, Recent IPO News, Live IPO GMP Today - Finance Saathi and stay updated with the latest news on IPO updates on Top News Headlines - Share Market News, Latest IPO News, Business News, Economy News - Finance Saathi. Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst & Finance Saathi Telegram Channel for Regular Share Market, News & IPO Updates. Start your Stock Market Journey and Apply in IPO by opening a Free Demat Account in Choice Broking FinX.