Navigating the labyrinth of cash transaction regulations in India can be daunting, yet it’s essential for individuals and businesses alike to stay compliant with the laws to avoid any unnecessary penalties. This blog aims to demystify these limits and help you understand how they might impact your financial activities.

1. Cash Deposit Limits

Savings Account: Individuals can deposit up to INR 10 lakh in a fiscal year in their savings account without triggering mandatory reporting to tax authorities. This limit is designed to monitor and control the flow of money and curb illegal activities such as money laundering and tax evasion.

Current Account: For businesses, the stakes are higher given their larger operational volumes. Limits can range significantly depending on the bank. For instance, the State Bank of India allows between INR 5 lakh to INR 100 crore per month, whereas HDFC permits deposits of 60 lakh or ten times the value of the current monthly balance (AMB).

2. Cash Withdrawal Limits

While there is no uniform limit on cash withdrawals, significant amounts often require reporting, especially if they exceed the thresholds set under Section 194N of the Income Tax Act. Here, withdrawals exceeding INR 1 crore within a fiscal year incur a 2% TDS. If you haven’t filed a tax return in the past three years, this TDS rate applies to withdrawals over INR 20 lakh, escalating to 5% for withdrawals over INR 1 crore.

3. Cash Transaction and Other Limits

Daily Limits: Section 269ST restricts cash transactions to INR 2 lakh per day to encourage documentation and prevent tax evasion.

Cash Gifts: Under the Income Tax Act, cash gifts up to INR 50,000 per fiscal year are tax-exempt. Gifts exceeding this amount from non-relatives could be taxed, encouraging transparency and accountability in financial gifts.

Fixed Deposits: The popular tax-saving fixed deposits have an upper limit of INR 1.5 lakh per fiscal year, allowing individuals to invest and save on taxes concurrently.

Credit Card Payments: For cash payments of credit card bills, banks like SBI and HDFC have set a per transaction limit of INR 49,000 to INR 50,000, aiming to limit high-value cash settlements.

4. Real Estate Transactions

For property transactions, cash dealings are strictly regulated. Payments over INR 20,000 are not permissible, with any amount over this requiring another form of transaction, which helps in combating under-the-table dealings and promotes transparency in the real estate sector.

Navigating Compliance

Staying compliant with these limits not only ensures legality but also aids in financial planning and management. For instance, knowing the fixed deposit limit can help in tax planning, while understanding the cash withdrawal limits can assist in large financial withdrawals or transactions without attracting undue attention.

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