How to Calculate and Pay Advance Tax for Corporates
How to Calculate and Pay Advance Tax for Corporates Advance tax, often referred to as "pay-as-you-earn," is the income tax payable in advance as per the provisions of the Income…
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New Guidelines on Cash Deposits: What You Need to Know
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.
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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