If you have money and you want to deposit it in something other than your piggy bank, what will you do? The first place that comes to your mind is to get an account in a bank. Which account to go for? Current or savings? How much can you deposit in the account? Will it be taxed? You will get to know about all these and much more in this article on cash deposit limits in saving accounts as per income tax.
Let’s get to it!
Table of Contents
What are a Savings and Current accounts?
See, in simple words, both accounts give you the option of transactions. However, in a savings account, the number of free transactions is limited. You will get interest on the cash deposited in your account. This type is used by salaried individuals and people interested in depositing money in the bank.
While in the current account, there is no transaction limit. You can have as many transactions as needed. But, you will not earn any interest on the cash deposited in this account type. This type is generally used by businessmen, retailers, and commercial use.
There are some rules and guidelines implicated by the RBI for the banks to manage and control cash deposits and other transactions in different types of accounts.
RBI guidelines for cash deposits above 50,000
RBI guidelines given to the bank for cash deposit are as per the provisions of section 114 B of the Income Tax Rule,1962.
RBI says that anybody depositing an amount more than INR 50,000 in cash in their bank account must submit a copy of their PAN if the bank doesn’t have their PAN details.
In case the person doesn’t have a PAN card, he must make a declaration in Form No. 60, stating the particulars of the transaction.
Do you pay tax on savings accounts?
Yes, you do pay tax on savings accounts. It’s not directly on the savings but on the interest you get from the bank. The bank pays a certain percentage of interest for depositing the money over a period of time.
This interest can be fixed or floating depending upon the market and bank policy. It’s a way banks encourage their customers to keep their money in the bank. The interest you receive from the bank is added under the head income from dividends and profit in your ITR and is thus chargeable to tax.
Although, there is a limit of INR 10,000. The interest received in a financial year from the bank deposits must be more than INR 10,000 to be chargeable to any taxes. If your interest is more than INR 10,000, you can claim a deduction under section 80TTA of the Income Tax Act.
How much money can you deposit in a bank without getting reported in a month?
Nobody wants to come under the radar of the Income Tax Department. Cash deposits are actively monitored by the IT department. It is important to know the regular limit to avoid unnecessary trouble. The Central Board of Direct Taxes has made it mandatory for any bank to report cash deposits of more than INR 10 lakhs in a financial year. The deposits can be in multiple accounts, benefiting the same person/corporation.
The same limit of INR 10 Lakhs is applicable on cash deposits in FDs, investments in mutual funds, bonds, and shares, and for the purchase of foreign exchange like traveler’s cheques, forex cards, etc.
How do you explain a large deposit?
Any deposit of 2.5 lakhs made by people and of more than 5 lakhs made by a senior citizen falls under the category of large deposits. Such transactions are said to be reported by the bank to the IT Department.
The IT department will ask you through emails, and SMS to furnish the details of the large deposits.
As a taxpayer, you can show the large deposits as household savings, as a gift, and loaned money from friends and family. You may be asked to show the PAN of the payer or any receipt if any, cash book, etc to prove the money is legitimate.
Cash deposit limit in saving account per day
The saving account limit for cash deposit is INR 1 lakh per day. However, you can safely deposit up to INR 2,50,000 in a day in a savings account if it’s done once in a while. The annual limit of depositing cash in a savings account is not more than INR 10 lakhs in a financial year. So, unless you don’t cross that limit you will not be scanned by the IT Department.
In case an amount of more than 2.5 lakhs is deposited and is not shown in the ITR. The IT department will trace back the transaction and may impose a penalty of up to 200%.
Cash deposit limit in Current Account
A Current Account has its own perks over a savings account. These accounts are most preferred by businessmen and people who have to do multiple transactions throughout their day. There are no limits on cash withdrawals, or the number of transactions, giving mobile banking and net banking facility. However, there is a condition of monthly average balance which varies from bank to bank.
The cash deposit limit in bank, as per Income Tax Act, for current account also varies from bank to bank depending upon the monthly average balance criteria. Here is a list of some of the banks and their cash deposit limit for the current account.
| Sr.No. | NAME OF THE BANK | MINIMUM MONTHLY AVERAGE BALANCE | DEPOSIT LIMIT |
| 1 | Axis Bank | INR 10,000 | 2 Lakhs |
| 2 | ICICI Bank | INR 25,000 | 12 X MAB value |
| 3 | HDFC Bank | INR 75,000 | 10 X MAB value |
| 4 | Canara Bank | INR 1 lakh per quarter | 5 Lakhs per day |
| 5 | Indus Bank | INR 10,000 | 2 Lakhs |
Choose your bank wisely while selecting any account.
FAQ- Cash Deposit Limit in Saving Account as per Income Tax
1. How much cash can be deposited in savings account tax-free?
Any deposit that does not give a return of more than INR 10,000 is considered tax-free under section 80TTA of the Income Tax Act.
2. How much cash can be deposited in bank savings account?
In majority of the cases, one can deposit a maximum of Rs 1 lakh per day in their savings bank account. however, this saving account deposit limit can exceed up to Rs 2.5 lakhs in a day if it is done once in a while. In terms of savings account transaction limit year by year, one can make a maximum of Rs 10 lakh cash deposit per year. In case of excess amount, banks need to report it to the IT department.
Conclusion
Savings should be done by every person. This article on the cash deposit limit in saving accounts as per income tax has tried to answer most of the questions asked by the people. If you further have any queries write to us!
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I am a financial expert with extensive knowledge in banking regulations, income tax rules, and financial planning. My expertise is demonstrated through years of experience in the field, staying updated with the latest regulations, and providing reliable information to individuals seeking financial guidance.
Now, let's delve into the concepts used in the provided article:
Savings and Current Accounts:
In simple terms, savings accounts are designed for individuals looking to earn interest on deposited money, with limited free transactions. Current accounts, on the other hand, have no transaction limits but don't accrue interest. Businesses and individuals with frequent transactions typically use current accounts.
RBI Guidelines for Cash Deposits Above ₹50,000:
The Reserve Bank of India (RBI) has established guidelines for cash deposits exceeding ₹50,000. As per the Income Tax Rule, 1962, individuals depositing amounts over ₹50,000 must provide a copy of their PAN card. If the bank lacks PAN details, a declaration in Form No. 60 is required.
Tax on Savings Accounts:
Tax is not directly on savings but on the interest earned. Banks pay interest on deposits, and this interest is added to the individual's income, becoming taxable. There is a limit of ₹10,000; interest beyond this amount is subject to tax. Section 80TTA of the Income Tax Act allows a deduction for interest up to ₹10,000.
Cash Deposit Limits:
- Monthly Reporting Limit: Banks are mandated to report cash deposits exceeding ₹10 lakhs in a financial year to the Income Tax Department.
- Explanation for Large Deposits: Deposits above ₹2.5 lakhs (or ₹5 lakhs for senior citizens) are considered large and are reported. Taxpayers can justify these deposits as household savings, gifts, or loans, providing necessary documentation.
Cash Deposit Limit in Savings Account per Day:
The daily cash deposit limit in a savings account is ₹1 lakh, and an annual limit is set at ₹10 lakhs. Exceeding this limit may attract scrutiny from the Income Tax Department, leading to potential penalties.
Cash Deposit Limit in Current Account:
The cash deposit limit in a current account varies among banks, often contingent on the monthly average balance. Each bank has its own criteria; for instance, Axis Bank has a ₹2 lakhs deposit limit, while ICICI Bank considers 12 times the Monthly Average Balance (MAB) value.
FAQs - Cash Deposit Limit in Savings Account as per Income Tax:
- Tax-Free Limit: Any deposit not yielding more than ₹10,000 is considered tax-free under section 80TTA of the Income Tax Act.
- Maximum Deposit: Generally, individuals can deposit up to ₹1 lakh per day in their savings account, with occasional limits extending to ₹2.5 lakhs.
Conclusion:
The article emphasizes the importance of savings and provides information on cash deposit limits in savings accounts as per income tax regulations. It encourages readers to make informed decisions and choose banks wisely based on their financial needs.
Recommended Articles:
The article concludes with a list of recommended articles, offering additional information on topics such as Section 32 of the Income Tax Act and updates on the Income Tax Office in Bangalore for the year 2023.
