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💰 Cash Deposit Limits & Income Tax: What You MUST Know!

💰 Cash Deposit Limits & Income Tax: What You MUST Know!

If you've ever deposited cash into your savings account and wondered, “Will this get flagged by the Income Tax Department?”, you're not alone.

Let’s break it down, question by question, with practical examples and crisp takeaways.

1️⃣ What’s the main threshold for cash deposits that may attract tax scrutiny?

👉 Rs 10 lakh in cash across all your savings accounts in a financial year (April–March).

🧾 Example: If you deposit ₹4 lakh in Bank A, ₹3 lakh in Bank B, and ₹3 lakh in Bank C, that’s ₹10 lakh total. Even though no single account crosses the threshold, you may still be flagged.

✅ Key Insight:
It’s not per account — it’s per PAN!

2️⃣ Are there daily deposit limits that can raise red flags?

Technically no, but banks do watch large single-day deposits.

  • Deposit above ₹50,000 in one day? PAN is mandatory.
  • Regularly depositing ₹1 lakh+? You may get noticed.
  • Deposits ₹2.5 lakh+ in one go, especially in cash-heavy months (like March)? Red alert! 🔴

💬 Tip: Keep a note of sources — salary, sales, rent, etc.

3️⃣ What happens if you exceed the ₹10 lakh limit?

Your bank will report it to the Income Tax Department via the AIR (Annual Information Return). This may lead to:

  • A notice asking for clarification
  • Requirement to submit proofs like sale deeds, rent receipts, etc.

🚨 If you can’t justify it, Section 68 comes into play.

💥 Penalty = 60% tax + 25% surcharge + 4% cess
(On unexplained income!)

4️⃣ What is Section 269ST and how does it affect you?

You cannot receive ₹2 lakh or more in cash:

  • In a single transaction
  • In multiple linked transactions on a single day
  • From a single person

🧾 Example: Selling a bike for ₹2.2 lakh in cash? ❌ Not allowed.

⚠️ Penalty: 100% of the cash received!

5️⃣ Are cash withdrawals also being tracked?

Yes, under Section 194N, TDS applies:

  • If you file ITRs regularly:
    • 2% TDS on withdrawals over ₹1 crore/year
  • If you haven’t filed ITRs for last 3 years:
    • 2% TDS on withdrawals above ₹20 lakh
    • 5% TDS on above ₹1 crore

✅ Key Insight:
TDS is adjustable in your final tax return.

6️⃣ What if you receive a tax notice about high-value cash deposits?

🧠 Don’t panic! Here's your 3-step plan:

  1. Gather Proof: Sale receipts, business income records, cash gift deeds, etc.
  2. Respond on time: Usually within 30 days
  3. Seek Expert Help: Consult a CA (that’s us! 😉)

🧾 Example: If your ₹5 lakh deposit came from selling old furniture, show sale agreement and delivery note.

7️⃣ Does the ₹10 lakh limit apply to each account separately?

Nope.

📌 It’s total cash across ALL your savings accounts combined for the entire financial year — and linked via your PAN.

So spreading ₹4 lakh in SBI, ₹3 lakh in HDFC, and ₹3 lakh in ICICI still equals ₹10 lakh. You're being watched, Sherlock. 🕵️

8️⃣ Is TDS on cash withdrawals a final tax?

No. It’s just advance tax — like a pre-payment.

📥 You can claim credit when filing your ITR.
It’s not an additional burden if your books are clean.

✅ Final Takeaways:

🧩 Do’s
✔ Maintain proper documentation
✔ Disclose cash income where needed
✔ Consult CA for high-value transactions

🚫 Don’ts
✘ Don’t receive ₹2 lakh+ in cash from one person
✘ Don’t assume multiple accounts = multiple ₹10L limits
✘ Don’t ignore a tax notice!

💡 Remember: The government’s systems .match your deposits, withdrawals, Form 26AS, and ITR. Clean books = peace of mind. 🧘‍♂️

Need help responding to a tax notice or planning high-cash transactions the legal way?

📞 Contact: CA Bhavesh Panpaliya – 8888755557
(Tax Intelligence Meets Practical Strategy)

 
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