Savings accounts are a fundamental financial tool for individuals from all walks of life, offering both security and interest on deposits. While there are no fixed limits on deposits in a savings account, excessive transactions may attract scrutiny from tax authorities. Understanding the permissible deposit and withdrawal thresholds is essential to stay compliant with tax regulations and avoid unnecessary attention from the Income Tax Department.
This article delves into the deposit limits, reporting requirements, and financial transactions that banks and financial institutions must report under Rule 114E of the Income Tax Rules.
Threshold for Deposits in a Savings Account
While savings accounts do not have a deposit cap, the government monitors high-value transactions to curb black money and enhance tax compliance. According to income tax regulations, banks and financial institutions must report specific transactions when deposits or withdrawals exceed prescribed limits.
| Type of Account | Threshold for Reporting (Cash Deposits & Withdrawals) |
|---|---|
| Savings Account | ₹10 lakh per financial year |
| Current Account | ₹50 lakh per financial year |
The ₹10 lakh threshold applies cumulatively across all savings accounts held by an individual in a financial year. If cash deposits surpass this limit, banks report the transactions to the Income Tax Department as part of the Statement of Financial Transactions (SFT).
How Are Large Deposits Monitored?
To track high-value transactions, banks, post offices, non-banking financial companies (NBFCs), and other financial institutions must furnish an SFT report. This report includes various transactions related to cash deposits, withdrawals, investments, foreign exchange transactions, and real estate purchases.
Key Considerations
- Tax Department Oversight – If deposits exceed ₹10 lakh in a savings account or ₹50 lakh in a current account, the tax department may initiate an inquiry to verify the source of funds.
- Cash vs. Non-Cash Transactions – Digital transactions, cheque payments, and online transfers are generally not scrutinized unless they fall under reportable transactions.
- Multiple Accounts & Aggregation – The limit of ₹10 lakh applies cumulatively across all savings accounts held in one or multiple banks.
Types of Financial Transactions That Must Be Reported
Under Rule 114E of the Income Tax Rules, 1962, several financial transactions require mandatory reporting to tax authorities. These transactions include deposits, withdrawals, credit card expenses, investments, and property purchases.
| Category | Reportable Transaction & Threshold |
|---|---|
| Savings Account Deposits | Cash deposits exceeding ₹10 lakh per financial year in one or more accounts. |
| Bank Drafts & Pay Orders | Cash payments exceeding ₹10 lakh for purchase of bank drafts, pay orders, or prepaid instruments issued by RBI. |
| Credit Card Payments (Cash) | Payments exceeding ₹1 lakh per financial year against a credit card bill. |
| Credit Card Payments (Non-Cash) | Payments exceeding ₹10 lakh per financial year using non-cash modes (cheque, NEFT, RTGS, UPI, etc.). |
| Investment in Bonds & Debentures | Investments exceeding ₹10 lakh per financial year in bonds or debentures. |
| Investment in Shares | Acquisition of shares worth ₹10 lakh or more in a financial year. |
| Mutual Fund Investments | Investments exceeding ₹10 lakh per financial year in mutual fund schemes. |
| Foreign Exchange Transactions | Foreign currency purchases exceeding ₹10 lakh per financial year. |
| Real Estate Transactions | Buying or selling property worth ₹30 lakh or more. |
Financial institutions must report these transactions to the Income Tax Department under Rule 114E to ensure compliance with tax laws.
Why Is Transaction Reporting Important?
The government mandates financial institutions to report high-value transactions to:
- Prevent Tax Evasion – Tracking large transactions helps authorities identify unreported income and potential tax evasion.
- Monitor Black Money – The process discourages unaccounted cash flow and money laundering.
- Expand the Tax Base – Encouraging proper tax reporting increases government revenue and ensures fair taxation.
Individuals making substantial transactions should maintain proper documentation to justify the source of funds in case of scrutiny.
How to Avoid Unnecessary Tax Scrutiny?
1. Maintain Clear Financial Records
Always keep a record of income sources, bank statements, and receipts for large transactions to provide a clear audit trail if needed.
2. Prefer Digital Transactions
Opt for digital transfers (NEFT, RTGS, UPI) rather than cash deposits to avoid triggering reporting thresholds unnecessarily.
3. Avoid Splitting Deposits
Depositing smaller amounts across multiple accounts to avoid reporting is discouraged and may still attract scrutiny under Benami Transaction Act provisions.
4. Report Income Accurately
Declare all income sources while filing tax returns to avoid discrepancies between reported income and bank transactions.
5. Consult a Tax Advisor
For high-value transactions, seek professional advice to ensure compliance with tax laws and minimize potential inquiries.
Frequently Asked Questions
1. Is there a limit on how much money I can deposit in my savings account?
No, there is no upper limit on deposits, but transactions exceeding ₹10 lakh in a financial year are reported to tax authorities.
2. Will I be taxed for depositing ₹10 lakh in my bank account?
Deposits themselves are not taxable, but the tax department may inquire about the source of funds if they exceed reporting thresholds.
3. Can I avoid scrutiny by depositing money in multiple banks?
No, all savings accounts held by an individual are aggregated for reporting purposes. Depositing across multiple banks will not bypass the ₹10 lakh threshold.
4. Do non-cash transactions get reported to the Income Tax Department?
Yes, non-cash transactions like credit card payments above ₹10 lakh, investments in shares, bonds, or mutual funds over ₹10 lakh, and property purchases above ₹30 lakh must be reported.
5. What happens if I don’t declare my income but deposit large sums?
Undeclared income may trigger an inquiry or audit. If discrepancies are found, penalties and tax liabilities may be imposed under the Income Tax Act.
6. How can I check if my bank has reported my transactions?
You can check the Annual Information Statement (AIS) and Form 26AS on the Income Tax Department’s e-filing portal to see reported transactions.
While there are no restrictions on savings account deposits, crossing the ₹10 lakh threshold in a financial year may lead to tax scrutiny. To stay compliant, individuals should maintain proper financial records, declare income accurately, and consult a tax expert when making substantial transactions.
Understanding the reporting requirements helps individuals make informed financial decisions while ensuring smooth banking operations without triggering unnecessary tax scrutiny.
Click here to know more.
Kishan is a knowledgeable writer specializing in agriculture and the latest government job recruitments, delivering clear and insightful content to inform and empower readers.
