In our daily financial routines, a savings account is like a trusty companion, offering a safe space for our hard-earned money while generating a bit of interest. But, have you ever wondered about the limit on deposits and withdrawals to avoid catching the eye of the taxman?
Tax experts reveal that the government has implemented measures to curb undisclosed income and broaden the tax base. Now, banks, corporations, post offices, and others are obligated to submit a Statement of Financial Reporting (SFT) when transactions in a savings account surpass a certain threshold. These transactions include cash movements, investments, credit card expenses, and more.
Understanding the Threshold
To stay off the taxman’s radar, it’s crucial to grasp the reporting requirements. For instance, cash deposits or withdrawals exceeding Rs 10 lakh in a financial year must be reported by banking companies. Current accounts, on the other hand, have a higher threshold of Rs 50 lakh.
Other Reportable Transactions:
Aside from cash transactions, various activities fall under the reporting requirements. Let’s take a closer look at what needs to be reported according to Rule 114E of the Income Tax Rules, 1962:
- Banking Companies and Co-operative Banks:
- Cash deposits exceeding Rs 10 lakh in a financial year.
- Cash payments of Rs 10 lakh or more for bank drafts, pay orders, or banker’s cheques.
- Credit Card Issuers:
- Cash payments of Rs 1 lakh or more in a financial year for credit card bills.
- Non-cash payments exceeding Rs 10 lakh for credit card bills.
- Bonds or Debentures Issuers:
- Receipts of Rs 10 lakh or more in a financial year for acquiring bonds or debentures.
- Share Issuers:
- Receipts of Rs 10 lakh or more in a financial year for acquiring shares.
- Listed Companies Buying Back Shares:
- Buyback of shares amounting to Rs 10 lakh or more in a financial year.
- Mutual Fund Trustees:
- Receipts of Rs 10 lakh or more in a financial year for acquiring mutual fund units.
- Foreign Exchange Dealers:
- Receipts of Rs 10 lakh or more in a financial year for the sale of foreign currency.
- Property Transactions:
- Purchase or sale of immovable property worth Rs 30 lakh or more.
Before making any transactions in your savings account, it’s essential to understand and adhere to these rules. By staying informed and compliant, you can navigate the financial landscape with confidence and avoid triggering unnecessary scrutiny from the tax authorities.