Adhering to cash deposit and withdrawal limits is crucial to remain compliant with the Income Tax Act in India. This article aims to elucidate the various facets of cash-related regulations, encompassing savings and current accounts, fixed deposits, credit card bill payments, real estate transactions, and more.
Cash Deposit Limits in Savings and Current Accounts
The Indian Income Tax Act imposes specific regulations on significant cash deposits in savings accounts. Individuals accumulating INR 10 lakh or more during a fiscal year must notify tax authorities.
For current accounts, this threshold is set higher at INR 50 lakh. Although not immediately taxed, financial institutions report transactions exceeding these limits.
Cash Withdrawal and TDS under Section 194N
Section 194N outlines TDS rules for cash withdrawals. A 2% TDS is levied on withdrawals exceeding INR 1 crore within a fiscal year. Non-filers face a 2% TDS on withdrawals over INR 20 lakh and a 5% TDS on amounts exceeding INR 1 crore. Notably, TDS under Section 194N serves as a credit during income tax return filing.
Business Context: Sections 44AD/44ADA
Business deposits aligned with turnover declared in income tax returns (Sections 44AD/44ADA) are exempt from penalties. Unrelated deposits may attract tax department attention, leading to potential penalties.
Other Cash Transaction Limits
a. Cash Deposit Limit in Current Account:
Current accounts, used for business transactions, often have higher cash deposit limits. Banks set varying limits, such as SBI’s 5 lakh to INR 100 crore per month or HDFC’s 60 lakh or ten times the current monthly balance.
b. Cash Transaction Limit:
Cash transactions, including withdrawals, transfers, and payments, are limited to INR 2 lakh per day under Section 269ST.
c. Cash Withdrawal Limit:
To prevent illegal activities, banks impose cash withdrawal limits. Individuals with multiple bank accounts can withdraw INR 1 crore per bank without TDS implications.
d. Cash Gift Limit:
Cash gifts up to INR 50,000 in a financial year are exempt from taxation. Gifts from immediate relatives are also exempt, irrespective of value.
In India, it is not uncommon to give expensive presents such as jewelry and even property on the occasion of marriage. However, under current rules, you do not have to pay any tax on gifts received when you get married, irrespective of their value.
If you receive money or property as an inheritance or through a will, that is legally considered a gift because you do not make any payment to receive it. In this case, too, no gift taxation is applicable.
Another example of a tax-exempt gift is when you receive money or property from local authorities or any recognized religious or charitable organization.
e. Fixed Deposit Limit:
Tax-saving fixed deposits have a maximum deposit limit of INR 1.5 lakh per financial year, offering potential tax benefits.
f. Credit Card Bill Payment Limit:
Cash payments for credit card bills have limitations set by banks, such as SBI’s INR 50,000 per day and HDFC’s INR 49,000.
g. Real Estate Transactions Limit:
Cash transactions in real estate are regulated, with a prohibition on cash exceeding INR 20,000. Full cash payments for property acquisition are not permissible, attracting penalties.
Understanding these cash transaction limits is crucial for individuals and businesses to ensure compliance and avoid legal repercussions. Stay informed and adapt your financial strategies accordingly to navigate the intricate landscape of income tax regulations in India.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
