Recently, the Indian Income-tax has laid regulations regarding cash transactions and made efforts to improve transparency. This regulations are made to manage financial activities like tax evasion and money laundering.
The rules are aimed to monitor the cash flows in the economy, which are important for both businesses and individuals to understand. In this post, we will tell you about the cash transaction limit declared by the income tax department. The cash deposit limit is possessed by savings and current bank accounts.
Cash deposits Limit
The cash deposit limit is applied by the Income tax department. These limits are put on savings accounts and current accounts. The cash deposit limit on a savings account refers to the cash amount that an individual needs to deposit in a given time without attracting the tax authorities’ attention. Income tax regulations set this limit to monitor and regulate the flow of cash transactions. It deals with potential tax evasion, money laundering, and other financial activities.
According to the Income Tax Act provisions, some regulations are set regarding cash transactions, including cash deposits. Individuals who deposit cash in savings accounts and get INR 10 lakh or more in a fiscal year need to know about tax authorities. For the holders who have current accounts, this reporting threshold is increased to INR 50 lakh.
For people, it is important to know that these cash deposits are not subjected to instant taxation because banks are responsible for reporting transactions that exceed these limits to the Income Tax Department.
Tax deductions at Sources on Withdrawals
Section 194N
Section 194N specifies the cash withdrawals that exceed INR 1 crore in the fiscal year with 2% TDS. The people who do not filed the income tax returns for previous 3 years, there is 2% TDS rate applicable to withdrawals on amount more than 20 lakhs. The 5% TDS withdrawal rate applies to amounts more than 1 crore. The deducted TDS amount is credited against the income tax obligations of taxpayers.
Cash Transaction Restrictions
Section 269ST, 269T, and 269SS
- Section 269ST possesses the penalties for getting 2 lakh or more in cash on single transactions or other transactions in a year. It is different from TDS on bank withdrawals that exceed the limits.
- Section 269T and 269SS handle cash loans and state that they accept or repay loans in cash of more than 20,000. It may result in penalties equal to the loan amount.
Cash deposits taxation
Banks play an important role in ensuring compliance with regulations by reporting cash deposits to authorities. It is also important for businesses and individuals to know about sections 44AD/44ADA when declaring the business turnover to avoid penalties.
Additional limits on Cash deposits
Beyond the current and savings accounts, specific limits are applied to cash transactions. Here are additional cash deposits limit
- Cash deposit limit in the current account- The cash deposit limit in the current account varies according to the bank, but it is usually higher than the business needs
- Cash withdrawal limit- The cash withdrawal limit is aimed at preventing illegal activities. Keep in mind that large cash withdrawals are reported in banks.
- Cash gift limit- Cash gift limit regulates the cash gifts that a person can give or get without attracting taxes
- Fixed deposit limit- Fixed deposit limit dictates the maximum amount that is deposited in a fixed account
- Credit card bill payment limit- Credit Card bill payment limit is set to impose restrictions on amounts that are paid in cash towards credit card bills
- Real estate transactions limit – Real estate transactions limit enforces the limit on cash payments in real estate and promotes transparency
