Limits of Cash Deposits / Withdrawal for Savings Accounts
Individuals engaging in cash deposits into savings accounts undergo close scrutiny. Transactions breaching or equaling INR 10 lakh within a fiscal year mandate reporting by bank / institutions to tax authorities. This protocol aims to thwart the influx of untaxed funds into the financial realm without detection.
Considerations for Current Accounts
Entities operating via current accounts encounter a higher bar, with a reporting threshold fixed at INR 50 lakh. This distinction acknowledges the heightened transactional volume typically associated with businesses. It's imperative to emphasize that while these deposits remain initially untaxed, banks are obligated to notify the Income Tax Department of any transactions surpassing these thresholds.
To clarify , withdrawals or deposits in cash can be done without any limit from any bank accounts but if if above mentioned limits are crossed than banks / institutions than they are directed to report transactions to the income tax authority
Tax Deductions at Source (TDS) upon Withdrawal
Section 194N
This provision stipulates that cash withdrawals exceeding INR 1 crore within a fiscal year incur a 2% TDS. For individuals lacking income tax return filings over the preceding three years, the TDS rate stands at 2% for withdrawals surpassing INR 20 lakh and 5% for withdrawals breaching INR 1 crore. Crucially, the deducted TDS can offset the taxpayer's income tax liabilities.
Income Tax Limits on Cash Transactions
Sections 269ST, 269SS, and 269T
Section 269ST levies penalties for receiving INR 2 lakh or more in cash during a single transaction or related transactions within a year, apart from TDS on bank withdrawals exceeding established thresholds.
Sections 269SS and 269T pertain to cash loans or deposits, indicating that accepting or repaying loans in cash exceeding INR 20,000 could trigger penalties equivalent to the loan amount.
Taxation of Cash Inflows
Financial institutions assume a pivotal role in ensuring adherence to these regulations by disclosing significant cash deposits to the authorities. It's equally crucial for individuals and businesses to remain cognizant of Sections 44AD/44ADA when disclosing business turnover to avert unnecessary penalties.
To read more about Section 44AD and how higher profits are to be shown under section 44AD click here
Further Cash Transaction Boundaries
In addition to savings and current accounts, distinct limits govern various transactions:
Current Account Cash Deposit Limit: Varies by bank but generally accommodates higher thresholds to suit business exigencies.
Cash Withdrawal Threshold: Intended to deter illicit activities by ensuring sizable withdrawals are reported.
Cash Gifting Cap: Governs the quantum of cash gifts permissible without incurring taxes.
Fixed Deposit Ceiling: Determines the maximum sum eligible for deposit in a fixed deposit account.
Credit Card Bill Settlement Boundary: Places constraints on cash payments toward settling credit card dues.
Real Estate Transaction Parameters: Enforces restrictions on cash disbursements in real estate transactions to foster transparency.
Specifics Regarding Real Estate
In real estate dealings, purchasing property entirely in cash exceeding INR 20,000 is unlawful. This regulation forms part of broader endeavors to combat illicit funds in the sector. Nevertheless, recording cash payments in the sale deed is allowable, provided they do not exceed this threshold.
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