Understanding how savings and other bank accounts’ function may appear confusing at first. This confusion can be sorted if you take your time and understand the principles of cash deposits set by RBI or Reserve Bank of India for effective financial management. Discussed here are these restrictions to keep you aware and adept at handling your finances.
- Cash deposit limits in savings accounts
The RBI, in collaboration with the Central Board of Direct Taxes (CBDT), has created guidelines to limit the amount of cash you may deposit in a savings account. This is primarily intended to assist account holders and facilitate the Income Tax department’s monitoring activities. For example, the maximum cash deposit permitted in a savings account without triggering tax scrutiny is Rs 1 lakh per transaction. Furthermore, the yearly deposit limit in your online savings account is Rs 10 lakhs. Exceeding this limit might flag your account for a review by the tax authorities.
- Cash transaction limit in fixed deposits
For fixed deposits, the CBDT dictates that cash deposits cannot exceed Rs 10 lakh. To invest higher amounts, you should use cheques or internet banking options.
- Other cash transaction limits
It is not just savings bank accounts that have deposit limits. Other financial transactions come with their own ceilings, which you must be aware of –
Current accounts
Used mainly for business purposes, these accounts allow for higher transaction limits. Deposits totaling Rs 50 lakhs or more could trigger an income tax notice.
Credit card
Cash repayments towards credit card dues are capped at Rs 1 lakh.
Real estate transactions
For property dealings, the cash transaction limit is Rs 30 lakhs. Going beyond this may invite tax scrutiny.
Here’s a simplified table summarising the cash deposit limits for easy reference:
| Account type | Cash deposit limit | Additional notes |
| Savings account | Rs 1 lakh (per transaction), Rs 10 lakhs (annual) | Depositing more than these limits in your savings account might get you a notice from the tax authorities, as it could raise questions about the source of the funds. The annual limit is there to monitor and control large sums being deposited without proper documentation or explanation. |
| Fixed deposits | Rs 10 lakh (per deposit) | When you want to invest a larger amount in fixed deposits, you should use cheques or internet banking. This is because significant cash transactions are extensively monitored for tax compliance, but non-cash options offer a clear record of the transaction. |
| Current account | Rs 50 lakh (aggregate) | Current accounts have a higher deposit limit to accommodate the voluminous transactions typically associated with business operations. Deposits of more than Rs 50 lakhs may be reviewed by tax authorities to ensure that all transactions are genuine and properly accounted. |
| Credit card repayments | Rs 1 lakh | To avoid scrutiny and adhere to regulations, any credit card repayment above Rs 1 lakh should be made through cashless methods. This is to boost digital transactions while lowering the danger of fraud. |
| Real estate transactions | Rs 30 lakh | Transactions involving large cash payments in real estate are subject to tax notices if they exceed Rs 30 lakhs. This approach tries to reduce money laundering by ensuring that all significant transactions are properly registered and taxed. |
Ending note
By steering towards cashless or bank-to-bank transactions, you can understand the financial vertical more properly and stay within the boundaries set by the RBI. This approach not only helps in maintaining financial discipline but also in leveraging the benefits of modern banking to your advantage. Remember, staying informed and proactive about these limits can make your financial journey both rewarding and hassle free.