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Income Tax Guidelines: Are you aware that there are specific rules regarding cash deposits and withdrawals in savings accounts? If you don’t follow these rules, you may face penalties or even inquiries from the Income Tax (IT) department. Having this information is essential to avoid any mistakes, intentional or not.

Savings Account Update: Most people have savings accounts, often connected to UPI for transactions, and sometimes use them to deposit cash or withdraw large sums. But there are specific rules set by the IT department for these transactions, and following them is crucial to avoid issues.

Deposit Limits for Savings and Current Accounts
Income Tax rules set a limit on cash deposits in savings accounts. This limit is designed to monitor cash transactions to prevent money laundering, tax evasion, and other illegal financial activities. According to Forbes, if you deposit ₹10 lakh or more in a financial year into a savings account, it must be reported to the IT department. For current accounts, this limit is ₹50 lakh. Although no immediate tax is applied to such deposits, financial institutions are required to report transactions that exceed these limits to the IT department.

Section 194A: Tax Deduction on Large Withdrawals
If you withdraw more than ₹1 crore from your savings account in a financial year, a 2% TDS will be applied. If you haven’t filed ITR for the past three years, a 2% TDS will be applied on withdrawals exceeding ₹20 lakh. If such individuals withdraw ₹1 crore, a 5% TDS will be imposed. TDS deducted under Section 194N isn’t categorized as income, but it can be claimed as a credit when filing ITR.

Section 269ST: Penalties on Large Deposits
Under Section 269ST of the Income Tax Act, if a person deposits ₹2 lakh or more in cash in a particular financial year, a penalty may be imposed. However, this penalty doesn’t apply to cash withdrawals, though TDS may apply if the withdrawal exceeds a certain threshold.