Despite the rapidly growing trend of digital banking and UPI in the country, a large number of people consider it to be safest to keep their savings, emergency funds and capital in a bank's savings account. However, many times a question arises in the minds of account holders that how much money can be kept in the savings account and can a notice from the Income Tax Department be received if an amount of Rs 10 lakh or more is deposited in the account? According to the rules of the Reserve Bank of India (RBI) and the Income Tax Act, there is no maximum limit for keeping money in a savings account, but if you deposit cash amount of Rs 10 lakh or more in a financial year, then it is directly monitored by the financial agencies and the tax department. What is the ₹10 lakh rule and SFT reporting? Under Section 285BA and Rule 114E of the Income Tax Act, it is mandatory for banks and post offices to report large financial transactions to the government. SFT (Specified Financial Transaction): If a person deposits cash totaling Rs 10 lakh or more in one or more of his savings accounts during a financial year (April 1 to March 31), the bank automatically reports it to the Income Tax Department through 'SFT Report'. Limit for Current Account: This cash deposit reporting limit for current account holders is set at Rs 50 lakh per year. Exemption on digital transactions: If an amount of Rs 10 lakh or more has come into your account through online means like NEFT, RTGS, cheque, or salary credit, then it does not come under the purview of cash deposit rule, as its digital trail already exists. Under what circumstances can the Income Tax Department demand accounts? Sending information by the bank does not mean that you will have to pay tax immediately or will be raided. As long as you have a legitimate source of income for your deposit, there is nothing to worry about. But a notice from the Income Tax Department may come in the following cases: Mismatch in Income Tax Return (ITR) and deposited amount: If your declared annual income is Rs 3 lakh, but Rs 10-12 lakh has been deposited in cash in your savings account, then the department may ask questions about the source of income. Non-filing of ITR: If a person has a large cash amount deposited in his account and does not file the income tax return, the department can seek clarification by sending a notice under section 148 or 68. Structuring: Many people deposit Rs 2 lakh each in cash in different bank accounts to avoid the ₹10 lakh limit. Since all bank accounts are linked to the PAN card, the department's system captures it instantly. Failure to disclose the source of income may result in heavy tax and penalty. If the account holder is unable to produce valid proof of the source of Rs 10 lakh deposited (such as property sale document, agricultural income, valid gift deed or business bill) when given notice by the Income Tax Department, then that amount is considered as 'Unexplained Income' under Section 68 of the Income Tax Act. In this situation, a total tax of up to 78% and heavy penalty can be imposed on the entire amount including 60% flat tax, 25% surcharge and 4% cess. Keep these important things in mind while depositing large amounts of money: PAN card is mandatory: It is mandatory to give PAN card if you deposit more than ₹ 50,000 in cash in a day in any bank. Keep documentary evidence: If you have sold land or ancestral property, received a family gift or received cash from a legal business, preserve receipts, agreements or bank statements. Check AIS and 26AS: While filing income tax returns, match all the major transactions reported in your Annual Information Statement (AIS) with your return to avoid any discrepancies.
