Saving Account Rules: Know the Cash Deposit and Withdrawal Limits in Banks – Avoid Heavy Penalty from the Income Tax Department

India's banking sector is growing rapidly. After the Jan Dhan Yojana and the Digital India campaign, most citizens now have access to bank accounts. Having a savings account has become a common necessity. However, very few people know that there are rules and limits for depositing and withdrawing money from these accounts. Ignoring these can bring you under the Income Tax Department’s radar, and you may end up paying a heavy penalty.

In this article, we'll explain in simple and easy language how much money you can deposit or withdraw from your saving account, and what rules the Income Tax Department has in place for such transactions.

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What is a Saving Account?

A saving account is a bank account where individuals deposit their income or savings. The account also earns interest on the balance. Typically, salaried employees, students, homemakers, and common citizens use savings accounts. You can deposit money anytime and withdraw it when needed.

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Banking Transactions are Monitored

Banks and the Income Tax Department keep an eye on how much money is coming into and going out of your account. If your transactions exceed certain limits, the bank reports them to the Income Tax Department. Hence, it's important to understand and follow the banking and tax rules.

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Cash Deposit Limits

Daily Cash Deposit Limit

• If you deposit more than ₹50,000 in cash at once, you must provide your PAN card.

• Generally, a person can deposit up to ₹1,00,000 in cash per day without issues.

• Deposits above ₹2.5 lakh at a time may be reported to the Income Tax Department.

Yearly Cash Deposit Limit

• If you deposit over ₹10 lakh in cash in a year in your savings account, your account may come under scrutiny by the Income Tax Department.

• In such cases, you must clearly explain the source of the money.

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Limit for Deposits via Cheque

• There's no fixed limit for depositing money through a cheque.

• You can deposit from ₹1 to several lakhs using cheques.

• However, you must still have a valid source for the deposited amount.

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How Much Money Can You Keep in a Savings Account?

• There's no upper limit on how much money you can keep in a savings account.

• But if you maintain a large balance for a long time, the bank or tax department may ask for an explanation.

• So it’s important to file your Income Tax Returns (ITR) on time and maintain financial transparency.

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Withdrawal Limits from Savings Account

Cash Withdrawal Limits

• Most banks have a daily cash withdrawal limit, depending on the type of account and bank policy.

• You can usually withdraw ₹20,000 to ₹50,000 from an ATM.

• Over-the-counter withdrawals can go up to ₹1 lakh or more, but you may have to provide valid identification and a reason.

TDS and Tax Implications

• If you withdraw more than ₹20 lakh in cash in a financial year, banks may deduct TDS (Tax Deducted at Source).

• For those who haven’t filed ITR, the threshold reduces to ₹10 lakh.

• TDS can range from 2% to 5%, depending on your filing status.

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When Will the Income Tax Department Watch You?

You may come under the Income Tax Department’s radar in the following situations:

1. If you deposit more than ₹10 lakh in cash in a year.

2. If you make cash purchases above ₹2 lakh (like buying jewelry or vehicles).

3. If your annual credit card payments exceed ₹10 lakh.

4. If you invest a large amount in real estate or shares.

5. If you make cash transactions above ₹50,000 without PAN.

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Bank Reports to the Tax Department

• Banks report major transactions to the Income Tax Department via SFT (Statement of Financial Transactions).

• If your transaction is large, it will be flagged and reported.

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What Happens if You Fail to Provide Information?

If you make large deposits and fail to explain the source when questioned by the Income Tax Department, you may face:

• 60% tax

• 25% surcharge

• 4% cess

Total penalty and tax could go up to 90% of the amount.

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Important Tips to Avoid Penalty

1. Always keep a record of your transactions.

2. Link your PAN and Aadhaar to your bank account.

3. Prefer digital transactions over cash where possible.

4. File your ITR (Income Tax Return) every year without fail.

5. Don’t ignore any notices or alerts from the bank or IT department.

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Conclusion

While using a bank savings account is essential in today’s world, knowing the rules that govern it is even more important. Proper use of your savings account helps keep your savings secure, while also preventing legal and tax troubles.

If you deposit or withdraw money beyond the prescribed limits, the Income Tax Department will likely ask for proof of income or transaction source. Not being able to provide a satisfactory explanation can result in heavy penalties and additional taxes.

It’s best to be informed and cautious while making high-value transactions through your bank account.

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Frequently Asked Questions (FAQs)

Q. Is there a limit to the amount I can keep in my savings account?
A. No, there’s no limit. You can keep any amount. Just make sure you can explain its source.

Q. What is the cash deposit limit in a year?
A. If you deposit more than ₹10 lakh in cash in a year, your account may be reported to the Income Tax Department.

Q. Does TDS apply to all withdrawals?
A. No, only if your cash withdrawals exceed ₹20 lakh in a year (₹10 lakh if ITR not filed), TDS is applicable.

Q. Is there a limit for cheque deposits?
A. No fixed limit, but you should have a legitimate source of the deposited money.