Please take note of the following information regarding the rules outlined by the Income Tax Department for cash deposits and withdrawals:
Cash Transaction Income Tax Rules: The Income Tax Department may scrutinize individuals who make substantial cash deposits and withdrawals in their bank accounts and question their sources of income.
The Income Tax Department closely monitors taxpayers and takes action against those who evade or improperly pay taxes on their income.
The department also examines bank accounts, particularly cash deposits and withdrawals, to combat money laundering, tax evasion, and other illegal financial activities.
Rules for Cash Deposits: According to Section 68 of the Income Tax Act, individuals making cash deposits in their bank accounts must disclose their sources of income.
Please do so to avoid a 60% tax, including a 25% surcharge and a 4% cess. If the source of income is not disclosed, the IT department will issue notices and recover the money.
Cash deposits exceeding Rs. 10 lakh in a financial year in a bank savings account must be reported to the Income Tax authorities.
The deposit limit for current accounts is Rs. 50 lakhs. Exceeding these limits without providing accurate information regarding the source of funds may lead to serious financial consequences.
Rules for Cash Withdrawals: Under Section 194N of the Income Tax Act, individuals making cash withdrawals of more than Rs. 1 crore in a financial year will be subjected to a 2% tax at source (TDS).
For individuals who have not filed their income tax returns (ITR) for the last three years, TDS is applicable on withdrawals above Rs 20 lakh, with a 5% tax at source (TCS).
Government’s Objective: The government has implemented these rules to reduce cash circulation and promote digital transactions, aiming to increase financial transparency and accountability.
Key Points to Remember:
- Maintain precise records of the sources of income for bank accounts.
- Adhere to cash deposit and withdrawal limits as per Income Tax Department guidelines.
- File your ITR regularly to avoid higher TDS on large withdrawals.