Income Tax: As the Income Tax Department ramps up efforts to monitor high-value cash transactions, individuals in India need to be aware of the limits on cash deposits in their bank accounts and the potential consequences of exceeding them. While there is no cap on the amount of money that can be held in a savings account, cash deposits are subject to strict scrutiny, particularly if they cross certain thresholds.
Rules for Cash Deposits and PAN Requirement
According to the current rules, individuals depositing Rs 50,000 or more in cash must provide their PAN (Permanent Account Number) to the bank. Additionally, while you can deposit up to Rs 1 lakh in cash per day, this limit may increase to Rs 2.50 lakh for those who do not make regular cash deposits. However, the most important restriction to note is that the total cash deposits in all your bank accounts should not exceed Rs 10 lakh in a single financial year.
Income Tax Scrutiny for Large Cash Deposits
If an individual deposits more than Rs 10 lakh in cash within a financial year, the bank is obligated to report this transaction to the Income Tax Department. In such cases, the account holder may be asked to provide detailed information about the source of the income. Failing to provide satisfactory explanations could lead to an investigation and significant penalties, as the department cracks down on unexplained or suspicious cash deposits.
Penalties for Non-Compliance
If the Income Tax Department finds that the cash deposited exceeds Rs 10 lakh and the source of the funds is not adequately explained, the individual could face penalties under the Income Tax Act. This makes it crucial for individuals handling large sums of money to maintain clear records of income sources and report high-value transactions accurately.
Managing High-Value Transactions
To avoid triggering scrutiny, individuals dealing with large sums of cash are advised to use digital payment methods or cheque transactions, which do not carry the same limitations as cash deposits. Understanding these rules is essential to ensuring compliance with tax laws and avoiding unnecessary investigations or penalties.
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