Income Tax Alert: New cash deposit rules and limits explained

This article explains the rules and limits for depositing cash in banks. Exceeding the limit can lead to inquiries and penalties. It is essential for customers to be aware of these rules.

Savings account

Nowadays, most people have a savings account. They transact money through it. Many times you also deposit money in the bank. But do you know that there are some rules regarding cash deposit in the bank? If you deposit more than a limit in a bank account in a financial year, the Income Tax Department may question you. However, cash deposit is a completely different matter and is subject to specific regulatory limits.

Cash Deposit Rules:

When it comes to cash deposits, banks follow strict guidelines issued by the government. If you deposit ₹50,000 or more in cash in a single transaction, you must provide your PAN (Permanent Account Number). The daily cash deposit limit is ₹1 lakh. If you are not a regular cash depositor, you may be allowed to deposit up to ₹2.5 lakh in a day, based on your account history and relationship with the bank.

Annual Limit for Cash Deposits:

As per current regulations, you can deposit up to ₹10 lakh in cash in a financial year without any alerts. But if the total cash deposits in all your accounts exceed this ₹10 lakh limit, the bank is legally obliged to report the transactions to the Income Tax Department. So, it's good to keep track of your total annual deposits to avoid scrutiny.

What happens if the limit is exceeded?

If you exceed the permissible cash deposit limit and fail to justify the source of your income in your Income Tax Return (ITR), the Income Tax Department may initiate an inquiry. In the absence of a valid source of income, you may face heavy penalties or legal action. Therefore, transparency and proper documentation are crucial when handling large cash transactions.

Diversified Investments:

While depositing a large amount in your account is not illegal if justified, it is often not financially wise to keep large sums in a savings account. Instead, consider fixed deposits (FDs), mutual funds, or other investments that offer better returns. Dhoni creates historic record in IPL cricket