You might be thinking, I have some cash to deposit but how do I do it without attracting a tax notice? Many salaried individuals, freelancers, or small business owners in India face this concern. Cash transactions are closely monitored, especially if the amounts are high. Understanding the rules around PAN, SFT, and Section 269ST is essential to stay compliant and avoid unnecessary trouble. Let’s break it down in simple terms and practical steps.
Understanding Cash Deposit Rules in India
1. PAN requirements for larger deposits
Banks usually require your PAN card when depositing ₹50,000 or more in a single transaction. This ensures KYC compliance and helps the Income Tax Department track larger transactions. Linking PAN with your savings account is a must to avoid delays.
2. Annual cash reporting (SFT)
If your total cash deposits in a savings account exceed ₹10 lakh in a financial year, banks report these transactions to the Income Tax Department under the Statement of Financial Transactions (SFT). This doesn’t automatically trigger a tax demand, but proper documentation is essential.
3. Section 269ST – limits for businesses
Small businesses and shop owners need to note that you cannot receive ₹2 lakh or more in cash from a single person in one day or transaction. Receiving such amounts in cash violates the rule and may lead to penalties equal to the received amount.
Real-Life Examples
- Ravi, 35, software engineer, Mumbai: Ravi sells his old scooter for ₹70,000 and deposits the cash. He provides PAN and keeps a WhatsApp message from the buyer as proof. This helps him avoid IT queries.
- Amit, kirana shop owner, Nashik: Amit deposits daily cash collections. His annual deposits cross ₹10 lakh, triggering SFT reporting. By maintaining sales records and a ledger, he can justify deposits without stress.
- Sunita, freelancer, Delhi: Sunita receives a ₹3 lakh cash gift from a relative. She deposits it with PAN details and keeps a gift declaration, ensuring transparency and avoiding unnecessary IT notices.
Smart Ways to Deposit Cash
- Link your PAN: Makes large deposits smoother and avoids routine verification delays.
- Keep proof: Sale bills, invoices, gift declarations, or transaction records can save you from notices.
- Use banking channels for large sums: NEFT, IMPS, or cheques are safer than depositing big cash amounts.
- Avoid splitting deposits to evade reporting: Deliberate splitting may be considered tax evasion.
- Small businesses should maintain books: Daily reconciliation of cash and digital receipts reduces IT scrutiny.
- Know your bank policies: Some banks have free cash-deposit limits per month; beyond that, fees may apply.
FAQs
Q1: Is there a fixed daily cash deposit limit?
No fixed daily legal limit exists, but PAN is generally required for deposits ≥ ₹50,000, and banks report annual deposits ≥ ₹10 lakh under SFT.
Q2: Will my ₹10 lakh deposit automatically trigger tax?
Not automatically. Banks report it; tax authorities may seek clarification if deposits don’t match declared income. Keep documentation.
Q3: Can a customer pay ₹2.5 lakh in cash to my shop?
No — Section 269ST restricts cash receipts ≥ ₹2 lakh in one day/transaction. Use UPI, cheque, or bank transfer.
Q4: What if I split a large cash receipt?
Splitting deposits deliberately to avoid reporting can be considered tax evasion. Always use legitimate banking channels.
Q5: Where to check official rules?
RBI for KYC & bank guidance; Income Tax Department (SFT & Section 269ST rules); credible business outlets like ET Money, MoneyControl, Business Standard.
Q6: What if I deposit ₹9 lakh in one year and ₹2 lakh in the next?
Each financial year is calculated separately. As long as you don’t exceed ₹10 lakh in any single financial year, you’re within the safe limit.
Q7: Do cheque and online deposits count towards the cash limit?
No, only physical cash deposits count. Cheques, drafts, and electronic transfers are not included in this limit.
Conclusion
Depositing cash in India is safe if you follow simple steps: link PAN, maintain proof, prefer banking channels for large amounts, and keep records if running a business. Smart, transparent deposits prevent unnecessary IT notices and ensure smooth financial management.