Savings accounts are opened to keep money safe and let others earn some interest on it. However, most people do not know the cash deposit limits set by the Income Tax Department. These limits, when not adhered to, can have a tax notice triggered against such persons, resulting in avoidable legal hassles.
The Income Tax Department keeps strict scrutiny of any transactions that occur within the bank, especially cash deposits and withdrawals. There are maximum thresholds of cash deposits that can be made in a day and within a financial year to curb tax evasion. Noncompliance may lead to penalties, actions regarding your frozen account, or even lawsuits.
Let us examine these cash deposit rules for savings accounts for your benefit in terms of remaining compliant and out of trouble.
Maximum Cash Deposit Limit In Savings Account
The income tax department has set very specific and clear guidelines to manage cash deposits:
- Daily Cash Deposit Limit
You can deposit a maximum of ₹1 lakh in cash per day** into your savings account. If you deposit over this limit, the bank will report the transaction to the Income Tax Department, and you may get a notice asking for the source of that income. - Annual Cash Deposit Limit
The overall cash deposits should be below ₹10 lakh in the respective financial year. Massive cash deposits too often may raise red flags, and the tax authorities may scrutinize your account.
Read Also: Earn Up to ₹69,432 in Interest on ₹3 Lakh Investment- PNB Fixed Deposit (FD) Scheme
Why Does the Income Tax Department Care About Cash Deposits?
The government intends to eliminate black money and tax evasion. Unaccounted large cash deposits are looked upon as an attempt to conceal income. If you fail to give a credible source for such deposited amounts, you may encounter consequences like:
- Account freezing
- Heavy fines
- Legal action, including imprisonment
What Would Happen if You Ignored the Income Tax Notice?
If you receive a notice for exceeding cash deposit limits, do not neglect it. You must:
What Happens If You Ignore an Income Tax Notice?
- Respond within the deadline
- Provide valid proof of income (salary slips, gift deeds, sale receipts, etc.)
- File your ITR accurately
Failure to comply may lead to:
- Penalties under Section 269ST (up to 100% of the deposited amount)
- Bank account freeze
- Legal prosecution
Smart Steps to Avoid Cash Deposits Attracting Attention
To avoid unwanted scrutiny, better stick to the following practices:
- Don’t Just Throw a ₹1 Lakh Deposit – Spread it out for lesser amounts over multiple days.
- Use Digital Transfers – For amounts that lead into tax-related considerations, use UPI, NEFT, or RTGS.
- Keep Documents – Maintain bank slips, invoices, and proof of incoming funds in case of an audit.
- Declare Everything – Include all taxable money in ITR to avoid any legal tussle.