Cash deposit and withdrawal rules: Know the income tax rules for savings accounts and know how much cash you can deposit without any scrutiny.
Cash deposit and withdrawal rules: Do you know that some special rules have been made by the Income Tax Department regarding cash deposits and withdrawals in savings accounts? If these rules are not followed, you may face penalties or even be questioned by the authorities. It is necessary to understand these rules to avoid any unintentional mistakes.
Key Rules for Savings Account Transactions
If you have a savings account, it is linked to digital transactions like UPI. Although cash deposits and withdrawals are allowed in these accounts, limits and conditions have been set under the Income Tax Act to monitor high-value cash transactions. These rules are aimed at preventing money laundering, tax evasion and other illegal financial activities.
Cash Deposit Limits in Savings and Current Accounts
Savings Account Deposit Limits- If you deposit Rs 10 lakh or more in a financial year, the transaction must be reported to the Income Tax Department. This reporting helps authorities track large cash flows to detect suspicious activities.
Current account deposit limits- For current accounts, the limits are higher, with deposits above Rs 50 lakh in a financial year required to be reported to the Income Tax Department.
Note: While these deposits are not taxed immediately, financial institutions are legally bound to report transactions above these limits.
Cash withdrawal rules under section 194A
- If you withdraw more than Rs 1 crore from your savings account in a financial year, 2 per cent TDS (tax deduction at source) will apply.
- If you have not filed income tax returns (ITR) for the last three years, the TDS rate is stricter.
- 2 per cent TDS is applicable on withdrawals above Rs 20 lakh, and for withdrawals of Rs 1 crore or more, the TDS rate increases to 5 per cent.
TDS deducted under section 194N is not classified as income.
- Section 269ST- Penalty on large cash deposits
- Under section 269ST of the Income Tax Act, cash deposits of Rs 2 lakh or more in a financial year can attract a penalty.
- However, this rule applies only to cash deposits. Cash withdrawals, though subject to TDS for the high amount, do not attract a penalty under this section.
Why are these rules important?
These guidelines are part of the government’s effort to monitor and regulate cash transactions in India, ensure transparency and discourage illegal activities such as tax evasion.
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