As a savings account holder, you may often be told about deductions, fees and charges, withdrawal limits, and other such things. But did you ever know there is a cash deposit limit? Yes, there is a maximum cash deposit that is the same across all financial institutions.
Why are there limits on how much cash you can deposit into savings accounts? They are laid to prevent fraudulent activities, avoid tax evasion and maintain financial transparency. Do these limitations really impact you? If yes, then how? Let’s learn about them in detail.
What is the cash deposit limit for a savings account?
Cash deposit is the amount of physical cash you deposit in your savings account via visiting the bank branch or CDMs (cash deposit machines). As per the guidelines set out by the Reserve Bank of India (RBI), an account holder can deposit a limited amount of cash within a particular timeframe. These limitations are implied either on a daily or per-transaction basis.
How much is the cash deposit limit in a savings account?
A savings account can deposit a maximum ₹50,000 as a daily cash deposit. For transactions greater than ₹50,000, you’ll need to provide your PAN information. In case the depositor fails to submit the PAN details, it may lead to significant penalties or refusal of deposit. The maximum daily cash deposit is ₹1 lakh, which accounts for ₹10 lakhs annually. This goes for regular as well as zero balance savings accounts.
Taxation of cash deposits in savings accounts
Savings account deposits are subject to a deposit set by the Reserve Bank of India, which sets the maximum amount at ₹10 lakh every fiscal year. While these sums are not directly taxed, depositing more than this will be notified to the Income Tax Department for reviewing your transactions. Here are some important regulations you should be aware of:
- As per Section 194N of the Indian Income Tax Act, you must pay Tax Deducted at Source (TDS) on cash withdrawals. So, for transactions above ₹1 crore in a financial year, there is a 2% TDS. And for those who haven’t filed their income tax returns for the previous three years, there is a 2% TDS levied on cash withdrawals above ₹20 lakhs with 5% TDS on withdrawals exceeding ₹1 crore.
- Furthermore, Section 269ST of the Indian Income Tax Act states that if you receive more than ₹2 Lakhs or more in cash within a specific year or transaction. However, this doesn’t apply to bank withdrawals. The penalty is only charged if you surpass the established limit.
- On the other side, Sections 269SS and 269T outline regulations on cash loans. It says that there are penalties on accepting or repaying cash loans above ₹20,000, equivalent to the loan amount.
What happens if you cross the maximum cash deposit?
If you exceed the maximum cash deposit for your savings account, the banks will inform the income tax department about the transaction. It wouldn’t, however, be taxed then and there. Listed below are certain things you should take care of when making cash deposits in your savings account:
- Crossing the set limit would be considered a large deposit.
- You will have to submit the details about the source of income after the IT department contacts you via e-mail or SMS.
- The IT department is entirely within its rights to serve notices under Section 68 of the IT Act unless an explanation is provided for the source of the money.
- If you are still unable to confirm the income sources, a 60% tax, 25% surcharge, and 4% cess will be applied.
- If you receive a cash deposit of ₹2 lakhs or more during a fiscal year, you may also be subject to fines as prescribed by the IT department.
Endnote
You can take the assistance of a professional or consultant to help you streamline the tax filing process. They can help you based on your personal situation and are aware of all regulations, which ensure you remain compliant. Thus, being proactive in understanding these limits and regulations can save you from future penalties and financial stress.
To not exceed the maximum limit, you need to track your transactions daily. This you can easily manage by downloading and using the bank’s mobile app. For instance, you open a Kotak811 Super Savings Account, you access all your balance, transactions, bills and more, via the Kotak811 App. This accessibility allows you to stay informed and alert on all your day-to-day banking activities.