Understanding Your Savings Account: Income Tax Rules on Cash Deposits and Withdrawals
The Income Tax rules for 2024 have specific guidelines regarding the of cash in your savings account. It’s crucial to be aware of these regulations to avoid potential or scrutiny from the authorities.
The government has set limits on the amount of cash that can be deposited into your savings account during a given period. This measure aims to monitor financial transactions, preventing money laundering, tax evasion, and other unlawful activities.
If you deposit Rs. 10 lakh or more in your savings account within a financial year, the Income Tax department must be notified. However, for current accounts, this limit is set at Rs. 50 lakh. Adhering to these guidelines is to ensure compliance and avoid any legal complications.
There’s no immediate tax on the cash you withdraw, but financial must report transactions exceeding certain limits to the Income Tax Department. Section 194A is a rule that may affect you.
If you withdraw more than Rs 1crore from your savings account in a financial year, 2% of that amount will be deted as TDS. Those who haven’t filed their income tax returns for the last three years will have 2% TDS deducted on withdrawals over Rs 20 lakh, or 5% TDS on withdrawals over Rs 1 crore.
It’s important to note that the TDS deducted under Section 194N can be claimed as a credit when filing your income tax return.
Section 269ST of the Income Tax Act can impose a penalty if you deposit Rs 2 lakh or more cash within a financial year. However, this penalty doesn’t apply to withdrawals, though TDS may be deducted on withdrawals above a certain limit.
