The Income Tax Department of India continues to enforce strict norms on large cash transactions to ensure transparency and curb tax evasion. One such important regulation is the cash deposit limit in savings accounts, which plays a critical role in monitoring high-volume financial activity.
Understanding Cash Deposit Limits
As per the Income Tax Act, any cash deposit of ₹10 lakh or more in a savings account during a financial year must be reported by banks to the Income Tax Department. This does not mean the depositor is immediately taxed, but it may attract scrutiny if the source of income is unclear.
For current accounts, which are typically used by businesses, this threshold is increased to ₹50 lakh per annum. Financial institutions are obligated to notify the authorities if these limits are exceeded.
Section 194N: TDS on Cash Withdrawals
Under Section 194N, the following TDS (Tax Deducted at Source) rules apply:
- 2% TDS on cash withdrawals exceeding ₹1 crore in a financial year.
- If the individual hasn’t filed income tax returns for the past 3 years:
- 2% TDS on withdrawals above ₹20 lakh.
- 5% TDS on withdrawals above ₹1 crore.
This deducted TDS can later be claimed as credit when filing ITR.
Section 269ST: Restrictions on Cash Receipts
According to Section 269ST, no person can receive an amount of ₹2 lakh or more in cash:
- From a single person in a single day
- In respect of a single transaction
- In respect of transactions relating to one event or occasion
Violations can attract a penalty equal to the amount received.
Sections 269SS and 269T: Cash Loans and Repayments
Accepting or repaying cash loans or deposits exceeding ₹20,000 is not permitted. Non-compliance can lead to penalties equivalent to the loan amount.
Taxation of Cash Deposits
If someone cannot justify the source of deposited cash, the Income Tax Department can issue a notice under Section 68, and levy tax at 60%, along with a 25% surcharge and 4% cess, totaling nearly 78% taxation.
Section 44AD/44ADA: For Business Income
Deposits corresponding to declared turnover are not penalized. However, unexplained cash deposits unrelated to business could lead to scrutiny and penalties.
Other Key Cash Transaction Limits (2025)
- Current Account Deposit Limit: Varies by bank. Example: SBI permits ₹5 lakh to ₹100 crore per month. HDFC allows up to 10x the Average Monthly Balance.
- Cash Transaction Limit: ₹2 lakh/day maximum under Section 269ST.
- Cash Withdrawal Limit: Cumulative withdrawal across multiple banks can be ₹3 crore without TDS if done carefully.
- Cash Gift Limit: Gifts up to ₹50,000 in a year are exempt from tax unless received from non-relatives.
- Fixed Deposit Limit: Up to ₹1.5 lakh annually under tax-saving FDs.
- Credit Card Bill Payment in Cash: Limited to ₹50,000/day by most banks.
- Real Estate Transactions: Cash payments exceeding ₹20,000 not allowed. Entire flat cannot be bought in cash.
Guidelines for Property Transactions
- It is not allowed to buy flats using full cash. If a seller receives more than ₹20,000 in cash, they are penalized 100% of the amount.
- Cash amounts up to ₹20,000 can be recorded in the sale deed as long as they comply with the law.
Summary
Staying informed and compliant with income tax laws related to cash deposits and transactions is crucial. These measures help build a transparent financial system while protecting individuals and businesses from legal consequences.
FAQs
What is the maximum cash deposit allowed in a savings account in 2025?
Up to ₹10 lakh per financial year without triggering an automatic income tax report.
Do cash deposits get taxed immediately?
No, but large unexplained deposits can attract scrutiny and potential penalties.
Can I withdraw more than ₹1 crore from a bank?
Yes, but 2% TDS will apply if you cross this threshold.
Is it legal to receive ₹2 lakh in cash from someone?
No, receiving more than ₹2 lakh in cash violates Section 269ST and can attract heavy penalties.
Are there limits on cash gifts?
Yes, cash gifts above ₹50,000 from non-relatives are taxable.
What happens if I deposit cash but can’t prove its source?
You may face a tax rate of up to 78% under Section 68.
Can I pay my credit card bill in cash?
Yes, but most banks limit cash bill payments to around ₹50,000 per day.
Can a property be purchased fully in cash?
No, cash transactions above ₹20,000 in real estate are prohibited under Section 269SS.
Click here to know more.
Aanchal is a passionate writer with a keen interest in storytelling, content creation, and creative expression. She enjoys exploring diverse topics and crafting engaging narratives that captivate readers.