As digital transactions surge across the country, a growing number of individuals have turned to savings bank accounts to manage their finances. But few realise that there’s a financial ceiling that, if crossed, could draw the attention of the Income Tax Department, and possibly lead to stiff penalties.
According to regulations set by the Reserve Bank of India (RBI), individuals are allowed to deposit up to Rs 10 lakh in cash into their savings account in a single financial year. Exceeding this limit doesn’t automatically result in tax liability, but it does mandate a formal declaration to tax authorities.
Under the Annual Information Return (AIR) framework, banks are obligated to report high-value cash transactions to the Income Tax Department. If your deposits breach the Rs 10 lakh threshold, you’re expected to explain the source of those funds, especially if they don’t align with your declared income. In such cases, failure to provide adequate proof could result in scrutiny and a possible tax rate of up to 60% on the unexplained amount.
Moreover, while you don’t need to present your PAN card for cash deposits up to Rs 50,000, any transaction exceeding that amount requires PAN details to ensure compliance and traceability. This is part of a broader move by authorities to monitor unaccounted wealth and curb potential money laundering through banking channels.
It is also important to maintain receipts and invoices for high-value purchases such as smartphones, laptops, or digital cameras. These records could serve as crucial documentation during income tax assessments, especially when the value of such goods appears disproportionate to your reported income.
Though keeping money in your savings account is perfectly legal, it is vital to remain within the regulatory boundaries. A sudden influx of large sums, without supporting income documents, could raise red flags. To stay safe, maintain a clear trail of income sources and always disclose high-value transactions in your tax returns when necessary.