Having a savings account is essential for banking and digital transactions. While there’s no limit to the balance you can maintain, the Income Tax Department monitors high-value cash deposits.
Here’s everything you need to know about the rules and potential implications:
Is There a Limit on Savings Account Balance?
You can keep any amount of money in your savings account. However, if the balance or deposits fall under the purview of income tax, you must disclose the source of funds. While online or cheque transactions are unrestricted, cash deposits have specific limits and requirements.
Cash Deposit Rules in Savings Accounts
1. PAN Requirement for Deposits
- If you deposit ₹50,000 or more in cash, you must provide your PAN number.
2. Daily Cash Deposit Limit
- You can deposit up to ₹1 lakh in cash per day in your account.
3. Occasional Deposits
- If you don’t make regular cash deposits, you can deposit up to ₹2.5 lakh in a single day.
4. Annual Cash Deposit Limit
- A maximum of ₹10 lakh can be deposited in cash in a financial year. This applies to the cumulative deposits across all accounts held by a taxpayer.
When Does the IT Department Take Notice?
If you deposit more than ₹10 lakh in cash during a financial year, the bank must report this to the Income Tax Department. You will be required to provide a legitimate source for these funds in your Income Tax Return (ITR).
Consequences of Failing to Provide Proof
- Penalties: If you cannot justify the source of income, you may face:
- 60% tax on the amount
- 25% surcharge
- 4% cess
- Scrutiny: The department may initiate an investigation, and further penalties may apply if irregularities are found.
Cash Transactions Above ₹10 Lakh: What You Should Do
You can legally deposit over ₹10 lakh in cash if you have proper documentation and proof of income. For better returns and to avoid scrutiny, consider alternatives like:
- Fixed Deposits (FDs)
- Mutual Funds or other investment options
Conclusion
While there’s no cap on maintaining funds in your savings account, adhering to cash deposit rules can save you from unnecessary scrutiny or penalties. Always ensure that you document the source of your income and explore investment opportunities for higher returns.