Understanding the New Norms for Cash Deposits in Savings Accounts

The government keeps a close eye on cash transactions in today’s increasingly digital financial world. If you plan to deposit a significant amount of cash into your bank account, it is essential to know the rules and regulations so that you do not invite unwanted attention from the Income Tax Department.

The Rs 10 Lakh Threshold: A Red Flag

Depositing more than Rs 10 lakh in cash into your bank account during a financial year, that is, between April 1 and March 31, will attract a report to the Income Tax Department. This limit is on the aggregate cash deposits across all your accounts. Any amount above this limit will classify your transaction as high-value, which may attract attention from the tax authorities.

The Rs 50,000 Daily Limit

Even if you do not deposit a huge amount in one financial year, you should be cautious of the daily limits. You need to give your PAN number if you deposit more than Rs 50,000 in cash within a single day. In that case, you would be required to fill out Form 60/61 in case you do not give your PAN number. This rule is meant to monitor huge cash transactions and curb potential tax evasion.

Knowing the Implications of Cash Transactions

It prohibits cash receipts up to an amount of Rs 2 lakh in a day under Section 269ST of the Income Tax Act. The person cannot receive cash up to Rs 2 lakh at one go. This is also against big cash transactions and it would promote transparency. Thus, it is advisable that more than Rs 2 lakh is not deposited in cash at any given time into the account.

What Should I Do When I Get Notice

You must reply on time and exactly in a notice from the Income Tax Department claiming that you are involved with a high-value transaction; you will then have to send all the papers such as bank statements or invoices for explaining the source of money. There may be scenarios when you may not be clear about a particular process of tax system if you consult some tax consultants, they guide you.

Knowing all these regulations and acting according to them will save you from unnecessary scrutiny over your financial transactions. Transparency and record-keeping are very important in staying compliant with the Income Tax Act.

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