Cash Deposit in Saving Account that Department can't Track
In today's digitalized world, the Income Tax Department too get highly digitalized with latest software's with high end hardware in their IT Cell which lets the Department keeping an eye on every bank account that is being kept with any Bank by taxpayers. So if you deposit cash above certain prescribed limit in your Saving Bank Account then information regarding that deposit of cash is given by bank to Income Tax Department. So let's discuss that limit in this article which will lead in getting you a notice from Income Tax Department asking you the details and source of income earned by you.
Whenever any person deposits or withdraws an amount aggregating Rs. 10 Lakhs in a financial year, then such details will be provided by bank to Income Tax Department. Now two things will happen which are as follows:
Income Tax Return filed by you Match with Transactions
If the Income Tax Return filed by you with the Department is aligning with the transactions of cash deposit in your saving bank account and also aligning with the Income appearing in FORM-26AS then you are good to go no more formalities will be required. But in these times and in most of the cases, it does not happen that income disbursed by anybody is in cash, this case is very rare.
Income Tax Return filed by you Does NOT Match with Transactions
In this case, Department will simply issue a notice asking you the details of the income along with source of the income. And if the source of income explained by you is very genuine with proper supporting's then the Notice might get disposed but if the explanations given by you are not much convincing to the Income Tax Department then a proper officer who is looking after your case in Income Tax Department will start legal proceedings will treat those cash deposits as the unexplained cash credit in your account and will make you pay 60 percent of tax on that amount along with penalty and interest.
How to Avoid Getting Notice from Income Tax Department?
1. _File Income Tax Return on Time:_ Always file your Income Tax Return on or before the due date prescribed for filing the return. This will help you in avoiding the notice from Income Tax Department and also help you in explaining the source of income in a better way.
2. _Avoid Cash Deposits:_ Try to avoid cash deposits in your saving bank account. Instead of depositing cash, try to use digital payment methods such as UPI, NEFT, RTGS, IMPS etc. This will help you in avoiding the notice from Income Tax Department.
3. _Maintain Proper Records:_ Always maintain proper records of all your transactions. This will help you in explaining the source of income when the Department asks for it.
4. _Use Digital Payment Methods:_ Try to use digital payment methods as much as possible. This will help you in avoiding cash deposits and also help you in maintaining proper records of all your transactions.
5. _Reconcile with Form-26AS:_ Always consider FORM-26AS first, and do not forget to include all the income details along with TDS details mentioned in FORM-26AS in your Income Tax Return. Make sure that, Gross amounts appearing in FORM-26AS is also appearing in the Gross Income Head of Income Tax Return filed by you.
6. _Keep documents of Property Sold:_ During financial year if any property is being sold by you, then keep all the documents such as sale deed, assessment etc with you safely. So that when department asks for the reason of cash receipt, you will present all the documents.
7. _Maintain a Cash Book:_ Try to maintain a cash book to record all the cash transactions in that, and take it into consideration as well while filing the Income Tax Return.
The above details are only provided for Cash Deposit in saving bank accounts, but same to be taken care of in case of Current account. The limit of cash deposit in a financial year in a current account would be Rs. 50 lakhs instead of Rs. 10 lakhs as in case of saving bank accounts. And all the other details mentioned in the article regarding saving bank account would be applicable for the current account as well.
Other Details regarding Cash Deposit in saving bank account
- There is no limit regarding the maximum balance that one can have in their saving bank account.
- Cash Deposit Notice for Current year and Previous 6 year. For E.g. FY 2020-21 Cash Deposit notice can be served upon you by Income Tax Department upto 31.03.2028.