Income Tax Declared Cash Deposit Limit : “Indian Income-tax authorities have recently introduced regulations concerning cash transactions to enhance transparency and combat financial malpractices such as tax evasion and money laundering.
These rules are designed to track cash movements in the economy, which is crucial for businesses and individuals to be aware of. In this post, we will explain the cash transaction limits set by the income tax department, specifically focusing on the cash deposit limits applicable to savings and current bank accounts.
Cash deposits Limit
The Income Tax department has set cash deposit limits for both savings and current accounts. The cash deposit limit on a savings account indicates the maximum amount of cash an individual can deposit within a specified period without drawing the attention of tax authorities. These limits are established to oversee and control cash transactions, addressing concerns related to tax evasion, money laundering, and other financial irregularities
As per the Income Tax Act provisions, regulations are in place concerning cash transactions, specifically cash deposits. Individuals depositing INR 10 lakh or more in a fiscal year into their savings accounts are required to be reported to tax authorities. However, for those with current accounts, this reporting threshold is raised to INR 50 lakh.
It’s crucial for individuals to understand that these cash deposits do not immediately incur taxation, as banks are mandated to report transactions exceeding these thresholds to the Income Tax Department.
Tax Deductions at Source (TDS) on Withdrawals
- Under Section 194N, cash withdrawals exceeding INR 1 crore in a fiscal year are subject to a 2% TDS.
- Additionally, individuals who have not filed income tax returns for the past three years face a 2% TDS rate on withdrawals exceeding 20 lakhs.
- Withdrawals exceeding 1 crore incur a 5% TDS rate. The TDS amount deducted is adjusted against the income tax liabilities of taxpayers.
Cash Transaction Limitations
- Section 269ST deals with penalties for receiving 2 lakh or more in cash in a single transaction or multiple transactions within a year, distinct from TDS on bank withdrawals exceeding limits.
- Sections 269T and 269SS govern cash loans, stipulating that accepting or repaying loans in cash exceeding 20,000 may lead to penalties equivalent to the loan amount.
Taxation on Cash Deposits
Banks play a crucial role in upholding regulatory compliance by reporting cash deposits to authorities. It is essential for businesses and individuals to be aware of sections 44AD/44ADA when disclosing business turnover to prevent penalties.
Further Restrictions on Cash Deposits
Besides the standard current and savings accounts, there are specific limits that apply to various cash transactions. Here are some additional cash deposit limits to be aware of:
- Cash deposit limit in the current account: The cash deposit limit in a current account varies by bank, typically exceeding regular business needs.
- Cash withdrawal limit: Implemented to deter illicit activities, large cash withdrawals are monitored and reported by banks.
- Cash gift limit: Regulates the amount of cash gifts individuals can give or receive without incurring taxes.
- Fixed deposit limit: Sets the maximum deposit amount allowed in a fixed account.
- Credit card bill payment limit: Imposes restrictions on cash payments towards credit card bills.
- Real estate transactions limit: Enforces restrictions on cash payments in real estate transactions to enhance transparency.