Income Tax News: In today’s era of digital banking and government welfare schemes, having a savings account has become essential for every individual. A bank account is necessary not only to avail benefits from various government schemes but also to facilitate digital transactions. While there are no restrictions on opening multiple bank accounts in India, it is important to understand the rules regarding how much money can be deposited, especially in cash, in a savings account.
No Limit on Savings Account Balance
There is no maximum limit on the amount of money that can be kept in a savings account. Account holders can deposit any amount, be it in thousands, lakhs, or even crores, through cheque or online transactions without any restrictions. However, if the deposited amount falls under the purview of income tax, the individual must disclose the source of the income to avoid any issues with tax authorities.
Cash Deposit Limits
While there are no upper limits for cheque or online deposits, specific rules apply to cash deposits. If an individual deposits ₹50,000 or more in cash at a bank, it is mandatory to provide a Permanent Account Number (PAN). Additionally, a person can deposit up to ₹1 lakh in cash in a single day. For those who do not deposit cash regularly, the limit increases to ₹2.5 lakh.
In a financial year, the total cash deposit limit is ₹10 lakh. This applies across all savings accounts held by a taxpayer, regardless of whether the person has one or more accounts.
Income Tax Scrutiny on High Cash Deposits
If an individual deposits more than ₹10 lakh in cash within a financial year, the bank is required to report this transaction to the Income Tax Department. In such cases, the depositor must provide a valid source of income in their Income Tax Return (ITR). Failure to do so may trigger an investigation, and the individual could face hefty fines. The penalty for failing to disclose the income source includes a 60% tax, a 25% surcharge, and a 4% cess on the undisclosed amount.
Advisable to Opt for Investments
While there is no restriction on cash transactions above ₹10 lakh if the income is legitimate and disclosed, financial experts advise that instead of keeping large sums in a savings account, individuals should consider converting the amount into a Fixed Deposit (FD) or explore other investment options that offer higher returns.
Understanding these rules can help account holders manage their savings efficiently while staying compliant with tax regulations.
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