Cash Deposit Income Tax Notice: Meaning, Limits & How to Respond

You deposit cash in your bank account.

Everything feels normal.

And then suddenly —
You receive a cash deposit income tax notice.

Now the questions start:

“Why did I get this notice?”
“Is depositing cash illegal?”
“Do I have to pay tax again?”

Let’s clear this confusion.

Depositing cash is not illegal. But if the amount is high, the Income Tax Department may ask you to explain the source.

What is a Cash Deposit Income Tax Notice?

A cash deposit income tax notice is a communication sent when the department notices high cash deposits in your bank account.

This happens because:

•  Banks report large transactions
• Data is shared with the department
• Your deposits are matched with your income

If something doesn’t match, you receive a notice.

Cash Deposit Limit in Bank as per the Income Tax Act

Many people ask:

👉 What is the cash deposit limit?

Here are the commonly tracked limits:

• ₹10 lakh or more in savings account in a year
• ₹50 lakh or more in current account

These are not limits for depositing.

These are reporting limits.

If you cross them, the transaction is reported.

Why Did You Receive a Notice?

You may receive a cash deposit income tax notice if:

• Large cash deposits are made
• Income declared is low compared to deposits
• Deposits don’t match the ITR
• Suspicious transactions are detected

The department wants to verify the source.

Which Sections Apply to Cash Deposit Notices?

The notice may be issued under:

Section 133(6)

👉 Inquiry for information

Section 148

👉 Reassessment for undisclosed income

Section 68

👉 Unexplained cash credit

If you cannot explain your deposit, it may be taxed.

Cash Transaction Limit Per Day

There is no fixed limit for daily deposits.

But certain rules apply:

• High cash transactions are monitored
• Large deposits may trigger reporting

Also, for expenses:

👉 Cash payments above ₹2 lakh may attract penalties

Savings Account Transaction Limit Without Tax

Many people believe there is a “tax-free limit.”

There isn’t.

👉 Tax depends on income, not deposit

If your deposits are from genuine sources, there is no issue.

New Rules for Cash Deposit in Bank

The government has increased monitoring.

👉 Banks report large deposits
👉 PAN is required for big transactions
👉 Data is linked with AIS

So everything is tracked digitally.

How to Show Cash Deposit in ITR

To avoid notices, always report your income correctly.

You should:

• Include business income
• Show cash receipts
• Maintain proper records

If deposits match your income, there is no problem.

How to Reply to Cash Deposit Notice

Don’t panic.

Just explain the source.

Cash Deposit Notice Reply Format (Simple)

•  Mention your details
• Explain the source of cash
•  Attach proof
•  Submit response

Common Sources You Can Explain:

• Salary or business income
• Cash withdrawals redeposited
• Loan received
• Sale of asset
• Savings

Always support with documents.

Documents Required for Reply

You may need:

• Bank statements
• Cash book
• Income proof
• Sale documents
• Loan agreements

Proper documentation is very important.

What Happens If You Don’t Explain?

If you fail to justify:

•  Amount may be treated as unexplained income
• Tax up to 60% may apply
• Penalties can be added

So never ignore the notice.

Common Mistakes to Avoid

Many taxpayers:

Ignore the notice
Give an incomplete explanation
Don’t keep records
Show incorrect income
Delay response

Avoid these mistakes.

How to Avoid Cash Deposit Notices

To stay safe:

• Keep proper records
• Avoid large unexplained cash deposits
• File accurate returns
• Maintain cash book (if business)
• Match deposits with income

Transparency is key.

Final Thoughts

A cash deposit income tax notice is not something to fear.

It simply means:

👉 You deposited cash
👉 The department wants an explanation

If your source is genuine, you can easily justify it.

The key is:

👉 Maintain records
👉 Respond on time
👉 Provide proof

Don’t Risk Heavy Tax on Cash Deposits

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