Those who keep money in a savings account should strictly avoid making this mistake—otherwise, a single oversight could result in an Income Tax notice..

In today's times, it is common for everyone to possess a savings account. Salaries are often credited to these accounts, expenses are met, and the remaining funds are retained as deposits within the bank. However, have you ever considered that the Income Tax Department keeps a watchful eye on your savings account as well? Therefore, if you operate under the assumption that you can deposit any amount of money into a savings account without facing any repercussions, this mindset could land you in trouble. This is because, once a certain threshold is crossed, the Tax Department begins to scrutinize both your transactions and the interest accrued on your account.

**Question: What exactly is the limit for holding money in a savings account?**
First and foremost, it is crucial to understand that there is no direct, explicit taxable limit on the total amount of money one can hold in a bank account; however, the Income Tax Department maintains strict vigilance over all financial transactions.

According to the regulations, if you deposit or withdraw a cash amounting to ₹10 lakhs or more within a single financial year, the bank is mandated to report this information directly to the Income Tax Department. This report is referred to as an SFT (Statement of Financial Transactions).

**What is the most important thing to keep in mind?**
This limit applies to the aggregate total across *all* your bank accounts combined.
All your bank accounts are linked to your PAN card.
In other words, it is not easy to evade scrutiny simply by distributing your funds across different banks.

**Question: When might one receive an Income Tax notice?**
If the funds deposited in your bank account do not align with your declared income, you may come under the scrutiny of the Income Tax Department.

Notices may be issued in the following scenarios:
You may receive a notice if you make a sudden, large deposit.
You may receive a notice for engaging in frequent, large-value cash transactions.
If the balance visible in your account appears disproportionately high relative to your declared income.
Consequently, if you are unable to provide a satisfactory explanation, you could face both an official investigation and financial penalties.
**Question: How much tax is levied on the interest earned on a savings account?**
Many people mistakenly believe that the interest earned on a savings account is tax-free; however, this is not the case. According to Income Tax regulations, specific rules apply in this regard.

For individuals under the age of 60, Section 80TTA provides an exemption on interest income up to ₹10,000; any interest earned beyond this limit is taxable.

For senior citizens, Section 80TTB offers an exemption on interest income up to ₹50,000; any interest exceeding this amount is added to your total income and taxed accordingly.

Does the absence of TDS deduction mean no tax is payable?
This is a major misconception.
The reality is that banks often do not deduct TDS on savings accounts.
However, this does not imply that you are exempt from paying tax.
You are required to provide full details regarding your interest income when filing your Income Tax Return (ITR).
Failure to do so may result in the issuance of a notice later on.

Committing this error could land you in trouble.
Many people begin using their savings accounts for business-related activities—a significant mistake.
Therefore, you should avoid conducting transactions worth crores of rupees through a savings account.
You should refrain from depositing large sums of money without disclosing the source of funds.
Furthermore, you must not exceed the prescribed limits for cash transactions.
Concealing interest income in your ITR can prove to be a costly error.

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