Some of the significant changes in cash deposit regulation include
New instructions have been provided by the Income Tax Department on the deposits made to the savings account. As popular as it is to deposit large amounts of cash, be advised that a huge tax may be imposed. Below are new rules laid down and what they mean.
Deposit Limits and Taxation
The money that you save in your savings account can be any amount; however, cash deposit has some restrictions on the amount you wish to deposit. If you want to deposit ₹50,000 or more, your PAN number is needed and you cannot deposit more than ₹1 lakh in cash for one day. In case cash is not getting deposited at regular intervals then this limitation goes up to 2. 5 lakh rupees. In a financial year, the limit on the cash deposits is restricted up to ₹10 lakhs only.
What are the consequences of going over the limit?
Banks will inform the Income Tax Department if you deposit more than ₹10 lakh in cash in any given financial year. You will also have to describe how such cash was sourced. If you are unable to offer adequate details, then you are likely to encounter an investigation, a steep penalty, and recoveries of 60% on the deposited sum with a surcharge of 25% and a cess of 4%.
How to Avoid Issues
To calculate the temporal provisions, one should keep cash deposits below the set limits and back large cash deposits. If it is not practical to retain a substantial amount in a savings account, always opt for New FDs or other better monetary products.
