Many individuals maintain multiple bank accounts, often designating one for daily expenses and another as a savings account to secure their funds. However, it’s crucial to be aware that there is a limit on the deposits in a savings account, beyond which the income tax department may take notice. Surprisingly, many people are unaware of this regulation. In this article, we will shed light on this important topic.
Mandatory Reporting for Exceeding Transaction Limits
According to income tax regulations, the total amount deposited in a savings account should not exceed ₹10 lakh in a financial year. If it does, the income tax department may issue a notice to the account holder. As per Section 269ST of the Income Tax Act, an account holder is permitted to conduct transactions up to ₹2 lakh in a single day. Exceeding this limit requires the individual to clarify the source of the funds to the bank. These rules are designed to prevent tax evasion.
Banks Are Required to Report Large Transactions
Under the regulations, if an individual deposits ₹50,000 or more in a bank on a single day, the bank must report this transaction. Account holders are also required to provide their PAN details. If an individual does not possess a PAN, they must fill out Form 60 or 61. Additionally, any transaction exceeding ₹10 lakh from an account is classified as a high-value transaction, which the bank must report to the income tax department.
What to Do If You Receive a Tax Notice?
In cases where significant transactions occur without notifying the income tax department, one may receive a departmental notice. It is essential to respond to this notice appropriately. When replying, it is important to include necessary documentation, such as your bank account statement, investment records, and property-related documents. Timely and accurate responses to such notices are crucial to avoid legal complications.
