In an age of increasing financial scrutiny, understanding the limits of cash deposits in your savings account has never been more crucial. Whether you’re a salaried professional, small business owner, or someone handling family finances, being aware of income tax rules around cash transactions can save you from unexpected trouble with tax authorities.
What Is the Cash Deposit Limit in a Savings Account?
According to the Indian Income Tax Act, if you deposit cash amounting to INR 10 lakh or more in a savings account during a single financial year, it may raise red flags with the Income Tax Department. Financial institutions are obligated to report such transactions under Section 114B of the Income Tax Act, 1962. This threshold is aimed at preventing tax evasion, black money circulation, and money laundering.
If you are using a current account, commonly held by businesses, this threshold is much higher at INR 50 lakh per financial year.
It’s important to note that while deposits over these limits do not automatically result in tax liability, they will most likely trigger scrutiny or a notice from the tax department, especially if your income profile doesn’t match the volume of your cash transactions.
Section 194N: Cash Withdrawals Also Under Surveillance
The taxman is watching not just what you deposit, but what you withdraw as well. Under Section 194N of the Income Tax Act:
- If your cash withdrawals exceed INR 1 crore in a financial year, a 2% TDS (Tax Deducted at Source) will apply.
- If you haven’t filed income tax returns for the past three years, the threshold drops:
- 2% TDS applies on withdrawals exceeding INR 20 lakh.
- 5% TDS applies on withdrawals exceeding INR 1 crore.
Remember, this TDS is not a tax in itself. It is only an advance deduction and can be adjusted when you file your Income Tax Return (ITR).
Section 269ST: Limit on Cash Receipts
Another important rule is Section 269ST, which prohibits cash transactions above INR 2 lakh in a single transaction, single day, or from a single person. Violating this rule could result in a 100% penalty on the amount received.
Exceptions are made for government bodies, banks, and post offices—but individuals and businesses are required to strictly follow this limit.
Sections 269SS and 269T: Be Cautious with Cash Loans
The tax law also frowns upon giving or receiving loans or deposits of INR 20,000 or more in cash. Under Sections 269SS and 269T, doing so could lead to penalties equal to the amount of the transaction. So, if you’re lending money to a friend or relative, make sure it’s through cheque, bank transfer, or digital payment methods.
Real Estate Sector: No More All-Cash Deals
Thinking of buying a flat in cash? That’s illegal. The government has set strict limits on cash transactions in real estate to combat black money. According to Section 269SS, cash payments above INR 20,000 towards property purchases are prohibited, and violations invite 100% penalty.
While it is acceptable to record small cash payments (under INR 20,000) in the sale deed, these must be legitimate and documented transparently.
Bank-Specific Cash Deposit Limits
Banks themselves often impose their own cash handling rules. For instance:
- SBI allows current account holders to deposit anywhere between INR 5 lakh to INR 100 crore per month, depending on the account type.
- HDFC Bank allows up to INR 60 lakh or 10 times the average monthly balance. Crossing the limit may incur charges.
Savings accounts, however, are typically used for personal savings, and banks may alert the Income Tax Department if unusually large or frequent cash deposits are made.
Conclusion: Stay Aware, Stay Safe
In summary, the cash deposit limit in a savings account is INR 10 lakh per year, and exceeding it could lead to income tax scrutiny—even if it isn’t taxable right away. Combine this with the limits on cash withdrawals, receipts, and real estate transactions, and it becomes clear that India’s tax system is moving toward transparency and digital compliance.
To stay safe:
- Avoid large cash dealings when bank or digital options are available.
- File your income tax returns regularly.
- Keep documentation for all high-value transactions.
In today’s environment of stricter financial surveillance, knowledge is power—and protection.
