By a Tax-Smart Content Writer
Just imagine, our financial journey begins with a savings account. As a child, when I broke the piggy bank for the first time and deposited the money in the bank—how comforting it was, wasn't it? Savings accounts, to tell the truth, are the foundation of our financial life. We use it for daily transactions, save a little money for the future, and this also includes the salary. But do you know that this 'simple' savings account of yours also remains under the eyes of the Income Tax Department (ITD)?
Let's be honest, a lot of us just look at how much money came and how much went. But, ignoring the hidden rules and regulations that apply to deposits and withdrawals can be a costly mistake. When the limits of ₹10 lakh or ₹2 lakh are crossed, your bank becomes obligated to inform ITD. And that's where the fear of income tax notices starts!
In this article, as a professional Indian content writer and CO strategist, I will tell you all the essential rules that will help you stay in compliance and avoid unwelcome surprises (RED: Notices).
We will understand the information given in the first article once and talk about it in a little detail.
Many of us rely on savings accounts to manage our finances, but not everyone is aware of the regulations governing deposits and withdrawals. Ignoring these rules could land you in trouble with the Income Tax Department. Here’s what you need to know to stay compliant and avoid any unwelcome surprises.
These lines are very important. When we keep a large amount in the savings account, the ITD can assess that this money has not been taxed. If you deposit ₹15 lakh suddenly and your declared annual income is ₹ 5 lakh, then the department will definitely ask the question.
Deposit Limit Per Financial Year:
You can deposit up to ₹10 lakh in your savings account during a single financial year (April 1 to March 31). Exceeding this amount is classified as a high-value transaction.
This ₹10 lakh limit is not just for cash deposits. This is about total deposits. If you have multiple savings accounts (such as Axis Bank, HDFC Bank, SBI), then this limit is the total count of all accounts. If you deposit ₹6 lakh in one account and ₹5 lakh in another, the total becomes ₹11 lakh, and you fall into the category of high-value transactions. Banks send these details to the ITD in a specific format (Annual Information Return or Air/SAFT – Statement of Financial Transactions).
Similar to deposits, the maximum withdrawal limit is ₹10 lakh within a financial year.
Why is it important to have a limit on withdrawals as well? To tell the truth, the main reason for this is to prevent money laundering and terror financing. If a person withdraws large sums regularly, it could be a red flag. This rule reminds you that if you need a lot of cash on a regular basis, it is better to do proper documentation (such as business expenses) or current account.
New GST Registration Rules 2025 – Big Changes Every Business Must Know!
The second most important rule is the daily limit and the availability of PAN card.
Single-Day Transaction Cap:
Under Section 269ST of the Income Tax Act, you can make transactions of up to ₹2 lakh in a day.
This section 269ST is very powerful. Its purpose is to discourage high-value cash transactions. This rule is not limited to the savings account, but applies to any single transaction, whether it is buying a property, buying jewelry, or repaying the loan. If you make a cash transaction of more than ₹2 lakh, the penalty can be 100% tucked! Just imagine, if you are giving a cash gift of ₹ 3 lakh at your friend's wedding, then this rule vehicle will also apply! Always OPT Four Bank Transfers for Large Amount.
GSTR-3B Filing Guide 2025: Due Date, Late Fees, Interest & Step by Step Process
PAN Requirements:
For transactions exceeding ₹50,000 in a single day, you must provide your PAN card details. If you don’t have a PAN card, you are required to submit Form 60/61 instead.
It is now standard practice to show PAN card on every transaction above ₹50,000 (deposit or withdrawal). If your PAN card is not linked to the bank account, then the bank reports it to the non-compliance ITD. The Form 60/61 option is for those who do not have a PAN (such as some rural or minor account holders), but in modern India, having a PAN is a must for every major financial transaction.
Now let's come to the point where there is the most tension — the IT notice.
Income Tax Notices: When Do They Happen?
If your total deposits exceed ₹10 lakh in a year, your bank is obligated to report this activity to the Income Tax Department under Section 114B of the Income Tax Act, 1962. Consequently, you may receive an income tax notice requiring an explanation of your transactions.
Receiving this notice doesn't always mean you've done something wrong. It just means that your transaction value is more than the limit and the department has to source funds.
Case Study: I had a client, M.R. Sharma, who was a software engineer. He sold his old property and transferred ₹30 lakh to his savings account. The next month, he got a notice. Why? He did not mention 'Sale of Property' while filing ITR. As soon as he showed the sale deed papers of the property, the notice was resolved. The point is this: Explainable Source of Funds is your best defense.
Common mistakes of the common man
Family's money: Depositing your mother, father, or wife's money in your account (even if they have made a gift) is considered your transaction. If these gifts are above ₹50,000, then check the gift tax rules as well.
Multiple ATM deposits: Sometimes people deposit small amounts (such as ₹49,000) on different days, thinking that they will avoid that limit. ITD's systems are very sophisticated; They track these structuring patterns easly.
If the notice comes, don't panic. Always remember these three steps:
Understanding these savings account rules will help you manage your finances better and avoid unnecessary complications. Monitor your transactions, and always keep the required documentation handy to ensure smooth sailing with your banking and tax obligations.
Pro Tip: Always double-check large transactions and consult your bank or financial advisor for guidance if you're uncertain!
Savings account ka use emergency funds aur daily liquidity ke liye hona chahiye. Agar aapke paas bada corpus hai, toh use Fixed Deposits (FDs), Mutual Funds, ya other high-return instruments mein park karein.
Transaction Type
Annual Limit (Savings A/C)
Daily Cash Limit (Section 269ST)
Mandatory Requirement
Deposits
₹10 Lakh
N/A (General Rule)
PAN for > ₹50,000
Withdrawals
Any Single Transaction
N/A
₹2 Lakh (Cash)
ITD 7 saal tak ke purane records mang sakti hai. Isliye, apne major financial transactions ke documents — ITR copies, investment slips, loan agreements, bank statements — ko digitally ya physically, at least 8 saal tak secure rakhein.
Final CTA
So friends, these were the important things related to the savings account that can save you from the scrutiny of the IT department. Remember, compliance is not a burden; it is peace of mind. If you still have any doubts in mind, or you have made a high-value transaction in the recent past, don't wait. Talk to a qualified tax consultant now and always keep the source of your funds ready. Manage your money smartly, and think nonchalantly. Share this article with your friends and family to help them stay safe to!
