It is important to know the limit of cash deposits in your savings account. According to the Income Tax Act, if you deposit more than a certain amount, you may receive a notice from the Income Tax Department. Let’s understand this in detail.
As per the Income Tax Act, if a person deposits ₹10 lakh or more in cash in a savings account during a financial year (from April 1 to March 31), the bank must report this information to the Income Tax Department. This rule is made to stop tax evasion and illegal activities.
Income Tax Rules for Cash Deposits: Know the Limits and Stay Safe
Not only savings accounts, but there are also rules for other accounts too.
Current Account:
For business people, the cash deposit limit in a current account is ₹50 lakh in one year.
Fixed Deposit (FD):
If you deposit more than ₹10 lakh in cash in FDs in one year, the bank will inform the Income Tax Department.
Daily Deposit Limit:
If you deposit more than ₹50,000 in cash in one day, you must show your PAN card.
When Can You Get an Income Tax Notice?
If the money in your account goes over the limit, the bank sends a report to the Income Tax Department. The department can then send you a notice asking where the money came from.
This notice is usually sent under Section 68 of the Income Tax Act. If you cannot prove the source of your money or if the details are wrong, you may have to pay a big fine.
Fines and Taxes:
If your answer is not clear, the full amount may be treated as Undisclosed Income. Then, you may have to pay 60% tax, plus 25% surcharge and 4% cess. This will increase the total tax amount.
How to Stay Safe?
- Always give the correct income details in your ITR.
- Use digital payments as much as possible.
- Make sure your PAN card is linked to your bank account.
- Keep all proofs of your big transactions.
- By following these simple rules, you can avoid income tax problems easily.
