In 2025, the Indian Income Tax Act underwent crucial updates, especially regarding cash deposits in savings accounts. These changes are part of the government’s effort to promote transparency in financial transactions, curb black money, and enhance tax compliance.
If you deposit or withdraw large amounts of cash from your bank account, you could now be subject to mandatory reporting, documentation requirements, and even penalties if not handled properly.
Let’s break this down in the most simple, clear, and professional way possible—so whether you’re a young saver or a financial consultant, this article is for you.
Income Tax Act 2025 Update
| Aspect | Details |
|---|---|
| Annual Cash Deposit Limit | ₹10 lakh (₹1 million) per financial year in savings account |
| Daily Cash Deposit Limit | ₹2 lakh per day |
| PAN Requirement | Mandatory for deposits above ₹50,000 in a single transaction or over ₹10 lakh yearly |
| TDS on Cash Withdrawal | Applicable under Section 194N for withdrawals exceeding ₹1 crore/year from all accounts |
| Form 61A Reporting | Banks must report cash deposits over limits to the Income Tax Department via Form 61A |
| Applicable Law | Income Tax Act, Section 285BA, Rule 114E |
| Official Source | incometax.gov.in |
Understanding the Income Tax Act 2025 update on cash deposits is crucial in today’s increasingly digitized financial world. While the rules are strict, they are not designed to punish honest taxpayers—but to ensure transparency and accountability.
The key to staying on the right side of the law is simple:
- Keep records
- Use digital payments
- Disclose your income honestly
- File your taxes on time
With proper planning and awareness, you can manage your finances smoothly—and legally.
Why These New Rules Were Introduced
With a rise in digital payments, the government is tightening control on high-value cash transactions to detect:
- Tax evasion
- Benami (proxy-owned) accounts
- Unreported income
- Black money circulation
According to a 2024 report by the Central Board of Direct Taxes (CBDT), over ₹2,000 crore in unexplained cash deposits were flagged during the last assessment year—prompting stricter compliance.
New Rules for Cash Deposits: Explained
1. Annual Deposit Limit – ₹10 Lakh in a Financial Year
If you deposit more than ₹10 lakh in cash to your savings account in a financial year (April–March), your bank will report it to the Income Tax Department under SFT (Specified Financial Transactions) compliance.
Tip: This includes multiple deposits—not just one-time payments.
2. Daily Cash Deposit Limit – ₹2 Lakh Per Day
Any cash deposit of ₹2 lakh or more in a single day will also be reported. This helps track unusual surges of cash.
3. PAN Requirements
Under Rule 114B, quoting PAN is mandatory if:
- You deposit ₹50,000 or more in a single transaction
- Or if cumulative deposits cross ₹10 lakh in a year
Failure to quote PAN may result in banks rejecting the transaction or flagging it for suspicious activity.
4. TDS on Withdrawals – Section 194N
While deposits are scrutinized, cash withdrawals also come under the scanner.
If you withdraw over:
- ₹20 lakh per year (from FY 2023–24), and
- You haven’t filed ITR for the past 3 years, banks may deduct TDS @ 2–5% under Section 194N.
Reporting Process – How the Govt Tracks It
Banks, post offices, and NBFCs report your transactions via Form 61A to the Income Tax Department.
They must report:
- Cash deposits > ₹10 lakh/year
- Cash deposits > ₹2 lakh/day
- Fixed deposits > ₹10 lakh
- Credit card payments > ₹1 lakh (cash), ₹10 lakh (other modes)
All of this forms your Annual Information Statement (AIS) available on your Income Tax e-filing portal.
How to Stay Compliant: Actionable Steps
- Track Your Deposits: Maintain a ledger or spreadsheet for all cash transactions.
- Prefer Digital Transactions: UPI, NEFT, IMPS are safer and less likely to trigger scrutiny.
- Always Quote Your PAN: Especially in high-value deposits.
- File ITR on Time: Especially if you’re dealing with high cash flows.
- Respond to Notices Promptly: If you receive a compliance query or SMS, don’t ignore it. Log in to your e-filing portal and respond.
Real-Life Examples
Example 1:
Ravi, a small trader, deposits ₹3 lakh in cash across 3 banks in one day. Although each deposit is below ₹2 lakh, collectively, the transaction may still be flagged under scrutiny.
Example 2:
Meena receives ₹12 lakh in cash from her home-based tuition business and deposits it over 6 months. Since it crosses ₹10 lakh, she must have documented proof (receipts, student logs) or risk penalty.
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Penalties for Non-Compliance
Under Section 271DA, if you deposit over the limit without a valid reason, you may face:
- A penalty equal to the amount deposited
- Interest and possible prosecution if linked to black money or unreported income
Frequently Asked Questions (FAQs)
Q1: Can I deposit ₹10 lakh cash in one go if I have proof?
Yes, as long as the source of funds is legitimate (e.g., property sale, loan, income), and PAN is quoted, you can deposit it. Be ready with documentation.
Q2: What if I split deposits to avoid ₹2 lakh/day rule?
Banks monitor suspicious structuring of deposits. Artificial splitting is a red flag and can lead to investigation.
Q3: Are these rules the same for current accounts?
No. Current accounts often have stricter limits and reporting, especially for businesses. Consult your tax advisor.
Q4: Where can I check what has been reported against my PAN?
You can log in to the Income Tax Portal and view your AIS (Annual Information Statement) and Form 26AS.
