Income Tax Act 2025 According to the Income Tax Act 2025, there is a fixed limit for cash deposits in a savings account. This limit is the amount that a person can deposit in a given period. Its purpose is to prevent money laundering, tax evasion, and illegal activities by monitoring cash transactions. If a person deposits Rs 10 lakh or more in cash in a financial year, then he is required to inform the Income Tax Department. This limit is Rs 50 lakh for a current account.

Responsibility of banks-

Banks and financial institutions give information about transactions above Rs 10 lakh (saving account) or Rs 50 lakh (current account) to the Income Tax Department. Although these deposits are not taxed immediately, it helps in monitoring large cash transactions.

Section 194N: Rules on cash withdrawal-

Under Section 194N of the Income Tax Act, there is a rule of TDS on cash withdrawal. If a person withdraws more than Rs 1 crore in cash in a financial year, 2% TDS is deducted. For those who have not filed income tax returns in the last three years, 2 per cent TDS is applicable on withdrawals above Rs 20 lakh and 5% TDS is applicable on withdrawals above Rs 1 crore. This TDS is not considered as income, but can be used as credit while filing ITR.

Section 269ST: Penalty on cash transactions-
Under Section 269ST, if a person accepts Rs 2 lakh or more in cash in a year or a single transaction, then he may be fined. This rule does not apply to cash withdrawals from the bank. TDS is deducted when the withdrawal limit is exceeded.

Section 269SS and 269T: Rules on cash loans-
Sections 269SS and 269T relate to cash loans. If a person takes or repays a cash loan of more than Rs 20,000, he may have to pay a penalty of the same amount. To follow these rules, it is important to understand the income tax rules. For those doing business, if the deposit amount matches the turnover of the business declared in their income tax return, especially under section 44AD/44ADA, then there is no penalty. But if the deposit amount is different from the business, then the Income Tax Department can investigate it.

Section 68: Proving the source of income-
If a person is unable to prove the source of his income, then the Income Tax Department can issue a notice under Section 68. In such a situation, 60% tax, 25% surcharge, and 4% cess can be imposed on unverified money. Overall, this can become a heavy tax burden.

How is tax levied on cash deposits?

If you deposit more than Rs 10 lakh in a savings account or Rs 50 lakh in a current account, it is mandatory to inform the Income Tax Department. This deposit is not directly taxable, but if the source is not clear, an investigation may take place. Violation of the rule may result in a fine or additional tax.

Disclaimer: This content has been sourced and edited from Hr Breaking. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.