If you’ve ever wondered how much cash you can keep in your savings account without triggering an Income Tax notice, here’s what you need to know: The total cash deposited or withdrawn in a savings account during a financial year shouldn’t exceed Rs 10 lakh. Going over this amount could attract attention from the Income Tax Department. So, it’s important to stay within this limit to avoid any scrutiny.
Understanding Daily Cash Limits
A common question is about the limit on cash transactions in one day. According to Section 269ST of the Income Tax Act, you can’t receive more than Rs 2 lakh in cash in a single transaction or related transactions on the same day. Also, if your total cash deposits across all savings accounts exceed Rs 10 lakh in a financial year, banks must report this to the Income Tax Department, even if these deposits are spread across multiple accounts.
What happens if you exceed the cash transaction limit?
If you deposit over Rs 10 lakh in cash during a financial year, it is considered a high-value transaction. Banks are required to report such deposits to the Income Tax Department. Additionally, if you deposit more than Rs 50,000 in cash in a single day, you will need to provide your PAN number. If you don’t have one, you’ll have to submit Form 60 or Form 61 instead.
How to handle Income Tax notices for large transactions?
If you receive an Income Tax notice for large transactions, you will need to provide supporting evidence to explain the source of the funds. This could include documents such as bank statements, investment records, or inheritance papers. If you are uncertain about the origin of your cash or need assistance, it’s best to seek advice from a tax expert to ensure you’re prepared.
Main highlights to note:
- To avoid scrutiny from the Income Tax Department, cash deposits or withdrawals in your savings account should stay under Rs 10 lakh in a financial year.
- Cash transactions over Rs 2 lakh per day are prohibited as per Section 269ST.
- Any high-value transactions crossing Rs 10 lakh in a year must be reported to the Income Tax Department.
- If you deposit Rs 50,000 or more in cash on a single day, you need to provide your PAN.
When responding to Income Tax notices, be prepared to submit supporting documents to clarify the source of your funds.
