New Guidelines on Cash Deposits: What You Need to Know

Cash Deposits

New Guidelines on Cash Deposits: What You Need to Know

Cash Deposits

With the Income Tax Department’s latest guidelines, there are new rules regarding cash deposits into savings accounts that everyone should be aware of. Here’s a breakdown of what you need to know to avoid hefty taxes and ensure compliance.

Understanding Cash Deposit Limits

In today’s digital age, having a savings account is almost essential. It not only helps in managing day-to-day transactions but is also necessary to benefit from various government schemes. While there are no restrictions on the maximum balance you can hold in your savings account, there are specific rules concerning cash deposits and withdrawals that you need to be aware of.

Cash Deposit Limits Explained

  • Deposit Amounts and PAN Requirement: When depositing cash, if the amount is Rs 50,000 or more, you must provide your PAN number. This is to ensure that the source of the cash is traceable.

  • Daily and Annual Limits:

    • Daily Limit: You can deposit up to Rs 1 lakh in cash per day.
    • Non-Regular Deposits: If you don’t deposit cash regularly, this limit can go up to Rs 2.50 lakh.
    • Annual Limit: Over a financial year, you can deposit a maximum of Rs 10 lakh in cash across all accounts you hold. This is a cumulative limit for all your accounts.
Cash Deposits

Monitoring and Reporting

Deposits exceeding Rs 10 lakh in a financial year will attract the attention of the Income Tax Department. Banks are required to report such large deposits, which may prompt an investigation if the source of the funds is not satisfactorily explained.

Potential Consequences

If you cannot provide a satisfactory explanation for the source of the deposited funds, you might face severe tax implications:

    • Tax Rate: A substantial 60% tax may be levied on the amount.
    • Additional Charges: In addition to the tax, a 25% surcharge and 4% cess could be applied.

Best Practices for Managing Large Sums

Instead of keeping large amounts of cash in your savings account, consider alternative options:

  • Fixed Deposits (FDs): Convert large sums into FDs to earn better interest.
  • Investments: Explore investment opportunities that offer better returns than a savings account.

While you can hold any amount in your savings account, managing cash deposits wisely is crucial to avoid unnecessary tax liabilities. By adhering to the limits and keeping track of your deposits, you can ensure that your finances remain in good standing with the Income Tax Department.

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Indexation & LTCG Benefits on Debt Mutual Funds!

FY 24 Budget amendment Is proposing that any capital gain made on investments made after April 1, 2023 in Non Equity MFs ( Funds which have more than 35 % investment in debt ) will not be eligible for Long Term Capital Gains benefits.

 

Gains from Debt MFs on investments made after April 1,2023 will only have Short Term Capital Gains taxable at slab rates as applicable irrespective of the holding period.

 

Please note all investments made before March 31,2023 will continue to enjoy LTCG and Indexation benefits.

 

 

Recommendation: Clients to Invest via Fixed Income Investment allocation before March 31,2023 to take advantage of LTCG and Indexation.

 

Read More: Most popular tax-saving investments before 31st March 2023

 

Existing Investments in fixed income fund should be continued as Long as possible as it will attract concessional LTCG tax rate.

 

Current proposal needs to be approved by the Parliament for becoming law.

NRI’s – Welcome to UPI!!

Non-Resident Indians (NRIs). Sending money back home or making merchant payments will be hassle-free, as the ‘Made in India’ real-time payments solution the Unified Payments Interface (UPI) will now be available to Indians living abroad.

 

National Payments Corporation of India (NPCI), the organization for operating retail payments and settlement systems in India, announced that it instructed members of the Unified Payments Interface (UPI) ecosystem to allow non-resident account types such as non-resident external (NRE)/ non-resident ordinary (NRO) accounts having international mobile numbers to get onboarded and transact through UPI.

 

NRI

 

NRIs who wish to avail of this facility need to have a NRE or NRO account. For the unversed, an NRE account isa bank account opened in India in the name of an NRI, topark his foreign earnings whereas, an NRO account is a bank account opened in India in the name of an NRI to manage the income earned by him/her in India.

 

UPI account is only allowed as “per the extant Foreign Exchange Management Act (FEMA) Regulations and adherence to the RBI guidelines.

 

UPI Modalities

For a person to have a UPI ID, he/she needed an Indian mobile number. When a user activates UPI from an app, for instance, Paytm, the app sends an SMS confirming that the mobile number is linked to the bank. This meant that those abroad had to keep their India numbers, which is exorbitant owing to international roaming prices.

 

NPCI said that now users will be able to access UPI without relying on their India mobile phone number

 

NRIs in 10 countries will be able to use UPI for payments including Singapore, Australia, Canada, Hong Kong, Oman, Qatar, USA, Saudi Arabia, United Arab Emirates, and the United Kingdom.

 

NRI

 

When will the facility begin?

UPIs for NRIs will commence shortly. All 382 member banks of NPCI have been asked to ensure that all non-resident account types are onboarded by 30 April.

 

UPI’s success story

Since its launch in 2016, the UPI system has gained massive popularity.

UPI recorded over 7.82 billion transactions worth Rs 12.82 trillion in December 2022.

 

Read More: What NRIs Need To Know About Form 10F

 

The system began with 21 banks in 2016 and today has expanded to 381 banks, enabling billions of digital transactions each month.