In a bid to meet their banking demands, individuals from all walks of life — which includes the salaried persons — are essential to have at least one savings account, though several also preserve many accounts for many causes. People with a steady revenue normally open a savings bank account mainly because that is a spot exactly where they can retailer their cash safely though earning some interest on the balance.
However, though there is normally no limit on the quantity of cash to be deposited in a savings account, have you ever wondered, how a great deal cash can you place into a savings account and also withdraw from it in a monetary year to remain outdoors the taxman’s radar?
Tax specialists say that in a bid to curb black cash and widen the tax base, the government has created it mandatory for banks, corporates, post offices and NBFCs, amongst other people, to furnish the Statement of Financial Reporting (SFT), when transactions in a savings account exceed the prescribed threshold. These transactions are in respect of money deposits/ withdrawals, investment in shares/ debentures/ time deposits/ mutual funds, credit card costs, buy of foreign exchange, transaction in immovable home and so on.
“The tax laws require banking companies to report cash deposits and withdrawals of Rs 10 lakh or more in bank accounts, other than current or time deposit accounts, on a regular basis during the year to the tax department as a part of SFT. This limit is seen in aggregate for cash deposits of Rs 10 lakh or more in a financial year, in one or more accounts (other than a current account and time deposit) of the tax payer. This enables the tax officer to make further inquiry on the source of funds, nature of receipt and ascertain whether appropriate taxes have been paid on the same or not,” says Aarti Raote, Partner, Deloitte India.
Thus, as money deposits and withdrawals of Rs 10 lakh or more in a bank account in a monetary year are essential to be reported to the tax authorities, you want to be cautious if you are exceeding the prescribed threshold. This limit is Rs 50 lakh and more in case of existing accounts. However, apart from money transactions, there are some other transactions also which you want to be conscious of.
Kapil Rana, Founder & Chairman, HostBooks Ltd, says, “A person should consider the nature and value of transactions that fall under reporting requirement of rules 114E of the Income Tax Act, to stay outside the radar of tax authorities, when withdrawing or depositing any amount from a saving bank account in a financial year. Therefore, we should be aware of the reportable transactions.”
According to Rana, the following transactions want to be reported below Rule 114E of the Income Tax Rules, 1962 (referred to as Statement of Financial Transaction):
A. Every banking organization or a co-operative bank, giving bank account facility and to which Banking Regulation Act, 1949 is applied, demands to report the following transactions:
# Cash deposit aggregating to Rs 10 lakh or more in a monetary year in one or more accounts (other than a existing account and time deposit) of a individual.
# Payment in money aggregating to Rs 10 lakh or more in a monetary year for the buy of bank drafts/ spend order/ banker’s cheque/ prepaid instruments issued by the Reserve Bank of India below section 18 of the Payment and Settlement Systems Act, 2007.
B. Credit card issuing Banking Company or a Co-operative Bank to which Banking Regulation Act, 1949 applies or any other organization or institution, shall want to report the following transactions.
# Payment in money aggregating to Rs 1 lakh or more in a monetary year against the bill raised in respect of one or more credit card issued.
# Payment by any mode other than money aggregating to Rs 10 lakh or more in a monetary year against the bill raised in respect of one or more credit card issued.
C. Company or institution issuing bonds or debentures demands to report the receipt from any individual of an quantity aggregating to Rs 10 lakh or more in a monetary year for acquiring bonds or debentures issued by the organization or institution (except the quantity received on account of renewal of the bond or debenture issued by the organization).
D. Company which is issuing shares demands to report receipt from any individual of an quantity aggregating to Rs 10 lakh or more in a monetary year for acquiring shares issued by the organization.
E. Company listed on the recognized stock exchange and acquiring its personal securities below section 68 of the Companies Act, 2013 demands to report buyback of shares of an quantity aggregating to Rs 10 lakh or more in a monetary year from any individual (except shares purchased in the open marketplace).
F. Trustee of a Mutual Fund or other individual who manages the affairs of the Mutual Fund demands to report the receipt from any individual of an quantity aggregating to Rs 10 lakh or more in a monetary year for acquiring units of one or more schemes of a Mutual Fund (except quantity received on account of transfer from one scheme to an additional of that Mutual Fund).
G. An authorised individual as referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999, demands to report the receipts from any individual of an quantity aggregating to Rs 10 lakh or more in a monetary year for the sale of foreign currency.
H. The Inspector-General appointed below section 3 of the Registration Act 1908 or Registrar or Sub-Registrar appointed below section 6 of that Act demands to report buy or sale by any individual of immovable home of an quantity Rs 30 lakh or more or valued by stamp valuation authority referred to in section 50C of the Act at Rs 30 lakh or more.
Thus, just before depositing or withdrawing any quantity in a bank account, we have to make confident that complying with the applicable provisions, we must not fall inside such transactions which are essential to be reported below Rule 114E either by a Banking Company, Co-operative Bank, Any other organization or Trustee of Mutual Fund, amongst other people.