The upper limit on cash deposits in savings accounts as per Income Tax (2024) refers to the maximum amount of money that an individual can invest within a specific period of time without attracting the notice of the income tax authorities. The reason behind setting these limits is to dissuade illegitimate and illicit financial activities such as money laundering, tax evasion, etc. According to Income Tax, the limit on cash deposits in savings account is Rs.1 lakh per day. Deposit amounts more than this should be notified to the tax authorities. Similarly, individuals who cumulative INR 10 lakhs or more during a financial year by investing in their savings account have to notify tax authorities. Apart from deposits in savings accounts, there are other cash transactions on savings accounts that one must be mindful of and the limits on them. 

Other Cash Transaction Limits in Saving Account as per the Income Tax

Section 194N 

The rules for TDS or tax deducted at source are specified in Section 194N of the Indian Income Tax Act. They are as follows: 

  • Withdrawals over INR 1 crore within a financial year attract a TDS of 2% if the income tax returns have been filed for all or any one of the three assessment years. 

  • A TDS of 2% applies to cash withdrawals of more than INR 20 lakhs within a financial year for people who have not filed their IT returns for the past three years. 

  • A TDS of 5% applies to cash withdrawals of more than INR 1 crore within a financial year for people who have not filed their IT returns for the past 3 years. 

  • Although the TDS deducted under Section 194N does not fall under income, it can be categorized as credit when filing income tax returns (ITR). 

Section 269ST 

  • Penalty equal to the transaction amount are levied under Section 269ST of the Income Tax Act for receiving Rs. 2 lakhs or more in cash within a specified tenure. However, bank withdrawals are excluded.

  • TDS deductions are also applicable to withdrawals that are more than the set limits. 

Section 269SS and 269T

  • Sections 269SS and 269T outline rules for cash loans. 

  • Taking or repaying a cash loan more than INR 20,000 in a given year attracts a penalty that is equal to the quantum of the cash loan

Section 44AD/44ADA

Deposits that are in accordance with the business turnover declared in the income tax return and those that fall under Sections 44AD or 44ADA do not attract penalties. Deposits that do not align with business operations may attract penalties. 

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Consequences of Transgressing the Cash deposit limit in savings accounts

If you exceed the cash deposit limit in your savings account, then the following will happen:

  • Banks are supposed to report the transactions that cross the limit to the IT department. But, the taxation will not happen immediately.

  • The IT department will send you an Email or an SMS to know the details about the income source. 

  • For investing more than Rs.50,000 or more in a single day, you will have to show your PAN card details if it is not furnished by the bank already. 

  • Exceeding the cash deposit limit of Rs. 2.5 lakhs in savings account per day for general citizens and Rs.5 Lakh by senior citizens is regarded as a large deposit. 

  • If you are not able to give proof of the source of income, the IT department can issue notices under Section 68 of the IT Act.

  • Even after receiving the notices, if you cannot authenticate the sources of income, then a tax of 60%, a surcharge of 25%, and a cess of 4% will be levied.

  • If you receive Rs.2 Lakhs or more in cash deposits within a financial year, the IT department also enforces penalties.

Limits on Other Types of Transactions in the Banking Sector

Cash Deposit Limit in Current Account

Current accounts are used by businesses and firms for daily transactions. Since businesses deal with higher volumes of cash, current accounts have a higher deposit limit as compared to savings accounts. But limits can vary across banks. For instance, the cash deposit limit in SBI is 5 lakhs to 100 crores per month. In HDFC, it is 60 lakhs or ten times the quantum of the current monthly balance (AMB). When limits are exceeded, an additional interest rate may be charged by the financial institution. 

Cash Withdrawal Limit

Cash withdrawal limits are outlined to stop illegal activities like money laundering and tax evasion. If a person has 3 different bank accounts with three different banks, then an amount of Rs. 1 crore can be withdrawn from each bank, thus summing up to Rs. 3 crore without attracting any TDS.  

Fixed Deposit Limit

Fixed deposit limits ensure that there is a maximum threshold for the amount invested in the fixed deposit account. To start a tax-saving FD, you will need to invest a minimum amount of Rs. 100. The upper limit on such deposits is Rs. 1.5 lakhs per financial year.  

Cash Gift Limit

Income tax places a limit on cash gifts that can be given without incurring taxation. This is done to prevent the evasion of taxes by those who disguise taxable income as cash gifts. All cash gifts do not have limits. The 1961 Income Tax Act lays down lucidly as to which gifts have limits. When you get gifts from parents, spouse, siblings, in-laws, or other immediate relatives, you are not subject to tax. The value of the gift does not factor in this case. Also, if you receive gifts or funds whose total value is Rs. 50,000 or less, then you do not have to pay any gift tax. 

Credit Card Bill Payment 

Credit card bill payments done in cash may have limits to dissuade the use of cash for making huge credit card bills. For SBI, the per diem limit for credit card (VISA) bill payments is INR 50,000 with an individual transaction limit of INR 25,000. For HDFC, it is 49,000. 

Real Estate Transactions Limit 

Cash is sometimes used unaccounted to make and finalize deals in real estate transactions. To oppose this, there is a threshold value on the amount of cash that can be used in transactions in real estate deals. Rules are in place to check if the transactions are documented and taxed properly. Cash transactions pertaining to real estate buys are strictly regulated and monitored. The government in doing so wants to curb the propagation of black money. 

Conclusion            

It is essential to conduct cash transactions within the limits prescribed by the IT department in order to avoid excessive taxation, penalties, and serving notices. So, it is important to keep yourself updated with the tax regulations from time to time so that you are aware of them and align yourselves accordingly.

Cash Deposit Limit in Savings Account FAQs

1. Can  I keep 10 lakhs in my savings account?

The cash deposit limit in a savings account as per income tax regulations in India is Rs.10 lakhs during a fiscal year. If you invest more than this amount, it will be noticed by the tax authorities. However, for current account holders, the upper limit is Rs. 50 lakhs. 

2. What are the rules for expenditure claims for self-employed individuals?

Self-employed individuals cannot make expenditure claims for an amount of more than Rs. 10,000 in a day if all of it are in cash. However, the threshold limit for transportation is Rs. 35,000. 

 

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