Cash Deposit Rules in Savings Accounts
There’s no restriction on the amount you can maintain in a savings account, but specific rules apply to cash deposits. If you deposit cash above a certain limit, banks are required to notify the Income Tax Department (ITD). Here’s what you need to know:
No Limit on Savings Account Balance
You can keep any amount in your savings account, but if large deposits fall under taxable income, you must declare the income source. There is a daily cash deposit limit of ₹1 lakh, though it can go up to ₹2.5 lakh for infrequent depositors. Deposits of up to ₹10 lakh can be made in a financial year; exceeding this limit could trigger ITD scrutiny.
Cash Deposit Requirements
For cash deposits of ₹50,000 or more, a PAN number is mandatory. Depositing over ₹10 lakh in cash within a financial year requires the bank to alert the ITD. If the source isn’t documented in your Income Tax Return (ITR), the ITD could initiate an investigation, potentially resulting in a 60% tax on the deposit, a 25% surcharge, and a 4% cess if the source remains unexplained.
Important Consideration
If you have valid income documentation, cash transactions above ₹10 lakh are allowed without penalties. However, it may be more beneficial to invest large amounts in fixed deposits (FDs) or other investments for better returns.