How much money can you put in and withdraw from a savings account over the course of a fiscal year to stay off the tax radar?
In order to meet their banking needs, people from all walks of life, including salaried people, are required to have at least one savings account, while many also maintain multiple accounts for various reasons. People with a stable income usually open a savings bank account because it is a place where they can safely store their money while earning interest on the balance.
However, while there is usually no limit to the amount of money you can put into a savings account, have you ever wondered how much money can you put into a savings account and also to withdraw during a financial year to stay outside the scope of the tax authorities? radar?
Tax experts say in an effort to reduce black money and broaden the tax base, the government has made it mandatory for banks, businesses, post offices and NBFCs, among others, to provide the return financial reporting (SFT), when transactions in a savings account exceed the prescribed threshold. These transactions involve cash deposits / withdrawals, investments in stocks / bonds / term deposits / mutual funds, credit card charges, currency purchases, real estate transactions, etc.
“The tax laws require that banking companies regularly declare during the year to the tax service within the framework of the SFT the cash deposits and the withdrawals of Rs 10 lakh or more on bank accounts, other than current accounts or eventually. This limit is considered globally for cash deposits of Rs 10 lakh or more during a financial year, in one or more accounts (other than a current account and a term deposit) of the taxpayer. This allows the tax officer to further investigate the source of funds, the nature of the receipt and determine whether the appropriate taxes were paid on the same or not, ”says Aarti Raote, partner, Deloitte India.
So, as cash deposits and withdrawals of Rs 10 lakh or more from a bank account during a fiscal year should be reported to the tax authorities, you should be careful if you exceed the prescribed threshold. This limit is Rs 50 lakh and more in the case of current accounts. However, apart from cash transactions, there are also other transactions that you should be aware of.
Kapil Rana, Founder and Chairman of HostBooks Ltd, said: “A person should consider the nature and value of transactions that fall under the reporting requirements of Rules 114E of the Income Tax Act, to stay off the radar of the tax authorities, when withdrawing or depositing any amount from a savings account during a fiscal year. Therefore, we must be aware of the transactions to be reported.
According to Rana, the following transactions must be reported under Rule 114E of the Income Tax Rules, 1962 (referred to as the Statement of Financial Transaction):
A. Each banking company or cooperative bank, providing a bank account facility and to which the Banking Regulation Act 1949 is applied, must report the following transactions:
# Cash deposit totaling Rs 10 lakh or more during a fiscal year in one or more accounts (other than a checking account and a term deposit) of a person.
# Cash payment totaling Rs 10 lakh or more in a financial year for the purchase of bank drafts / payment order / bank check / prepaid instruments issued by Reserve Bank of India under Article 18 of the Payment and Settlement Systems Act 2007.
B. The credit card issuing banking company or cooperative bank to which the Banking Regulation Act 1949 applies or any other company or institution must report the following transactions.
# Cash payment totaling Rs 1 lakh or more during a financial year against the invoice issued in respect of one or more credit cards issued.
# Payment by any method other than cash totaling Rs 10 lakh or more during a financial year against the invoice issued for one or more credit cards issued.
C. The company or institution issuing bonds or bonds must declare the receipt by any person of a total amount of Rs 10 lakh or more during a financial year for the acquisition of bonds or bonds issued by the company or institution (with the exception of the amount received in respect of the renewal of the bond or debenture issued by the company).
D. The company issuing shares must report the receipt of any person in the aggregate amount of Rs 10 lakh or more during a financial year for the acquisition of shares issued by the company.
E. A company listed on a recognized stock exchange and purchasing its own securities under section 68 of the Companies Act 2013 must report the repurchase of shares in the aggregate amount of Rs 10 lakh or more at the price of ” a financial year with any person (with the exception of shares bought on the open market).
F. The trustee of a mutual fund or other person who manages the affairs of the mutual fund must report the receipt of any person in the aggregate amount of Rs 10 lakh or more during a financial year for the acquisition of units of one or more schemes of a Mutual Fund (except for an amount received for the transfer from one scheme to another of this Mutual Fund).
G. An authorized person as referred to in clause (c) of article 2 of the Foreign Exchange Management Act 1999 shall declare the income of any person in the total amount of Rs 10 lakh or more during the course of ‘a financial year for the sale of foreign currency.
H. The Inspector General appointed under Section 3 of the Registration Act 1908 or the Registrar or Deputy Registrar appointed under Section 6 of that Act shall declare the purchase or sale by any person of immovable property in the amount of Rs 30 lakh or more or of a value by the stamp appraisal authority referred to in article 50C of the law at Rs 30 lakh or more.
Thus, before depositing or withdrawing an amount to a bank account, we must ensure that, in accordance with the applicable provisions, we should not fall into the scope of such transactions which must be reported under Rule 114E either by a banking company, a bank cooperative, any other company or mutual fund trustee, among others.
Financial Express is now on Telegram. Click here to join our channel and stay up to date with the latest news and updates from Biz.