Depositing money in your bank account seems routine, but large cash deposits can raise red flags with the Income Tax Department. Understanding the rules can help you avoid unnecessary notices. Here’s what you need to know:

1. Know the Thresholds

· Banks report cash deposits above ₹10 lakh per year to the Income Tax Department

· Even multiple smaller deposits that cumulatively cross this limit can trigger scrutiny

· Rule applies to individuals, businesses, and HUFs

2. PAN Linking is Crucial

· Always quote your PAN while depositing large amounts

· Failure to do so can lead to automatic reporting under Section 285BA

· PAN linking ensures that your transactions are transparent to the tax authorities

3. Sources of Income Must Be Clear

· Income Tax may ask for proof of the source if large cash deposits appear unusual

· Keep documents like salary slips, sale deeds, gift receipts, or business invoices handy

· Helps in avoiding notices and penalties

4. business vs. Personal Deposits

· Businesses depositing cash as part of day-to-day operations must maintain proper accounting

· For individuals, gifts or personal loans should be well-documented

· Transparency reduces the risk of tax scrutiny

5. Consequences of Ignoring Rules

· IT Department may send notices seeking explanation

· Non-compliance can lead to penalties, interest, or reassessment of income

· Maintaining proper records is the best preventive measure

💡 Bottom Line:
Large cash deposits in your bank account aren’t illegal, but lack of clarity can trigger an income tax notice. Always link your PAN, maintain proper documentation, and ensure the source of funds is transparent to avoid unnecessary hassles.

 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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Balasahana Suresh

04/11/2025 11:34 AM