Planning Big Cash Deposits? Ignoring RBI & Income Tax Rules Could Cost You Dearly
How Much Cash Is Too Much? RBI's Deposit Rules Every Account Holder Must Know, Depositing beyond the RBI-defined cash threshold can trigger income tax scrutiny and legal inquiries.
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How Much Cash Is Too Much? RBI's Deposit Rules Every Account Holder Must Know
FACT FILE: Understanding Cash Deposit Rules
| Point | Details |
|---|---|
| Max Cash Limit (Savings) | ₹10 lakh per Financial Year |
| Max Cash Limit (Current) | ₹50 lakh per Financial Year |
| PAN Requirement | Cash deposit of ₹50,000 or more in a single transaction |
| Reporting Mechanism | Bank must report high-value deposits via AIR to IT Dept. |
| If Limit Exceeded | Likely Income Tax inquiry under Section 131, 142(1), 148 |
| Tax Penalty | Up to 60% tax on unexplained income (Section 68) |
| Income Reflection | All deposits reflect in Form 26AS & AIS |
Savings Account — How Much Cash is Too Much?
In today's digital economy, a savings account is a must-have for salaried individuals, business owners, and students alike. But many are unaware that excessive cash deposits can trigger income tax scrutiny, especially when the deposited amount does not align with declared income.
RBI-Defined Cash Deposit Threshold
As per RBI guidelines, depositing ₹10 lakh or more in cash into your savings account within a single financial year compels banks to report the transaction to tax authorities under the Annual Information Return (AIR) system.
Higher Limits for Current Accounts
For current account holders, the cash deposit threshold is significantly higher at ₹50 lakh per financial year. However, breaching this limit still flags your transactions for review by the Income Tax Department.
PAN Card: A Must for Large Deposits
Any single cash deposit of ₹50,000 or more mandates the submission of your PAN details. Even if you make smaller deposits frequently, the combined total crossing ₹10 lakh within a year can raise red flags.
Section 68: The Cost of Unexplained Income
If deposits surpass the acceptable limits and the account holder fails to justify the source, the income tax department can classify the funds as "unexplained income." Under Section 68, a flat 60% tax along with surcharge and cess may apply.
Track Your Transactions: Form 26AS & AIS
Every high-value cash deposit is recorded in your Form 26AS and the Annual Information Statement (AIS). The IT department uses these records to cross-verify your declared income. Any mismatch could result in notices or inquiries.
