All savings accounts are subject to cash deposit limits set by the Reserve Bank of India (RBI). This means that you cannot deposit more than a fixed amount over a fixed period. And in the past few years, the income tax department has become more uncompromising against taxpayers’ high-value cash transactions. In cases of violation, the offender is sent a notice by the department.
The taxpayers must always report high-value transactions like mutual fund houses, bank transactions, registrations, and brokerages. Also, they must always keep their deposits under the cash deposit limit in savings account.
What is the Cash Deposit Limit in Savings Account as Per Income Tax?
- The RBI has set the cash deposit limit for savings accounts at ₹1 lakh per day. Any amount more than this in a day may be notified of to the tax authorities making them more vigilant.
- The saving account cash deposit limit in a year is ₹10 lakh.
Additional Rules or Cash Transaction Limits
Here are some additional cash deposit limits you must maintain and rules that must be followed:
Current Account Deposit Limit
Though current accounts are used typically for high-value business transactions including deposits and withdrawals, there’s a deposit limit of ₹50 lakh. On violating this limit, you may get a notice from the IT department.
Fixed Account Deposit Limit
Cash deposits in fixed accounts also have a maximum ceiling. Taxpayers cannot deposit a cash amount exceeding ₹10 lakh. However, you can create FDs of higher amounts via internet banking and cheques.
Credit Card Bill Payment Limit
When paying credit card bills the cash transaction limit is ₹1 lakh. To pay bills exceeding this amount, you can use other digital or cashless payment methods. Also, if you end up paying more than ₹10 lakh in a year against credit card bills, you will have to disclose the payments to the IT department on Form 26AS when filing ITR.
Stocks, Mutual Funds, Bonds, or Debentures Investment Limit
If you invest in shares, bonds, mutual funds, or debentures, you must ensure that your total investment is not more than ₹10 lakh per annum.
PAN Card Requirement Rules
Any transactions more than ₹50,000 in a day and over ₹20 lakh in a year would require a PAN card. If the taxpayer doesn’t have a PAN, they must apply for it at least seven days before making any cash transactions.
Cash Transaction Limit
As per the income tax laws in India, any cash transaction worth more than ₹2 lakh in a single go is prohibited. To make transactions of a greater amount, you can use alternative payment methods like bank transfer, debit card, credit card, or cheque.
Cash Gift Limit
Cash gifts above the limit of ₹2 lakh in a single day, even if it’s to family members or friends, are not allowed. In a single transaction, nobody can receive a cash gift of more than this amount by a single giver. If it is the case, the receiver may have to face a penalty equal to the transaction amount.
Health Insurance Premium Rule
If you pay for your health insurance premium in cash, you would be eligible for a deduction under Section 80D. To claim the deduction, you must pay the health insurance premium through payment modes like net banking, cheque, UPI, etc.
Cash Loan Limit
A cash loan from a financial institution or friend cannot be more than ₹20,000. The same also applies to the repayment of debt. Repayments of more than ₹20,000 must be made through net banking or UPI.
Real Estate Sales Rules
All real estate sales and purchases by taxpayers must be reported to the tax department in Form 26AS since the property registrar would report the same. This is because the property registrar must reveal all sales and investments of more than ₹30 lakh pertaining to immovable property.
Property Transaction Cash Limit
The maximum ceiling of cash transactions for properties is ₹20,000. This limit remains the same even when the seller receives an advance on the total payment.
Expenditure Claim Rule for Self-Employed Individuals
Self-employed individuals cannot receive any expenditure claims of more than ₹10,000 in a single day if the payment was made in cash. However, the transportation expenditure limit is ₹35,000.
Large deposits and withdrawals can lead to taxpayers paying penalties and attracting legal notice from the income tax department. The best alternative, in this case, is to go digital. It isn’t for no reason that the world is inclining more and more towards cashless transactions via digital banking.
When you choose to open a savings account online, you not only experience seamless transactions, but you can also make transactions with fewer limitations.
With Freo Savings, you get a 100% digital experience, which means no more frequent trips to your physical branch. You can open a digital savings account at zero balance and earn up to 7% interest without having to worry about paying a maintenance fee. Moreover, your account balance is insured up to ₹5 lakhs as per the RBI mandate.
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