Banking Rules: Cash Deposit & Withdrawal Limits as Per Income Tax Regulations

Understanding Savings Account Cash Transaction Limits
The Income Tax Department has established specific rules regarding cash deposits and withdrawals in savings accounts. Exceeding these limits can lead to penalties or scrutiny from tax authorities. Knowing these regulations can help you avoid unnecessary financial complications.
Deposit Limits in Savings & Current Accounts
- Savings Accounts: Deposits exceeding ₹10 lakh per financial year are reported to the Income Tax Department for monitoring.
- Current Accounts: Any deposit above ₹50 lakh in a financial year must be reported to tax authorities.
👉 Banks and financial institutions must report high-value transactions, though this does not mean immediate taxation.
Cash Withdrawal Tax (TDS) Under Section 194N
- For withdrawals above ₹1 crore: A 2% TDS (Tax Deducted at Source) is applicable.
- For individuals who haven't filed ITR in the past 3 years:
- 2% TDS on withdrawals above ₹20 lakh
- 5% TDS on withdrawals above ₹1 crore
💡 TDS deducted under this section can be claimed as a credit while filing Income Tax Returns (ITR).
Section 269ST: Penalty on Large Cash Deposits
- Depositing ₹2 lakh or more in cash in a single financial year may attract penalties under Section 269ST of the Income Tax Act.
- However, this rule applies only to cash deposits, not withdrawals.
Why These Rules Matter
These regulations aim to prevent money laundering, tax evasion, and financial fraud. Staying informed about these limits will help you manage your transactions efficiently and avoid unnecessary penalties. Always consult your bank or a financial advisor for clarity on these tax implications.