Be cautious, your savings bank account may be under scanner

Sajjad Bazaz
(straighttalkcommunication@gmail.com)

Even as the new year mood is still around, it is the time of the beginning of taxing moments for most of you as the last quarter of the financial year ending March 2025 is now underway. This is the time when salaried as well as business class get into the act of calculating their income tax burden. At the same time they look for appropriate tax rebate options to lessen their tax burden. This is also the time when people anxiously wait for budget with a hope to see more concessions in their way.
So, the tax season actually means some maddening moments for those who fall in the income tax bracket. However, those falling in the tax net need to gear up to make these maddening moments a very sane one. They can take the route of many tax saving instruments to earn tax rebates.
But during this process of navigating their tax liabilities to earn a tax rebate, most of them hardly look at the health of their savings bank account which can otherwise become cause for the taxman to lay hands on their financial affairs.
Yes, your savings bank account may be under the radar of the taxman. Before I explain the reason, let us understand the features of a savings bank account. Normally, a savings bank account is considered non-controversial, safe and convenient to operate for the kind of flexibility it offers an account holder to withdraw money whenever it is required. In fact, a savings bank account is the basic route to enter into a relationship with a bank and is enjoying popularity for its nature of accommodating persons of any financial position. In present times, savings bank account is a must even for people having poor financial standing as all government benefits are linked to these accounts. In other words, a savings bank account is serving as an identity proof of an account holder as these accounts are opened under Know Your Customer (KYC) guidelines. Even the savings account gives a sense of financial empowerment to an account holder.

Why may the taxman may be watching your savings bank account?
In order to meet their banking needs, people are required to have at least one savings account. Many also keep multiple accounts for various reasons. A savings bank account is a place where they can store their money safely while earning some interest on the balance.
There is usually no limit on the amount of money to be deposited in a savings account. But when the deposits cross a threshold limit in the account, the taxman comes into play. Actually there are proper regulatory guidelines in this regard which explain how much money you can put into a savings account and also withdraw from it in a financial year to stay outside the taxman’s lens.
The Reserve Bank of India (RBI) limits cash deposits in savings bank accounts to Rs.2 lakh per day, per transaction, and from a single person. The annual limit for cash deposits is Rs.10 lakh.
It’s to be noted that the government has made it mandatory for banks, corporates, post offices etc. to furnish the Statement of Financial Reporting (SFT), when transactions in a savings account exceed the prescribed threshold. These transactions are in respect of cash deposits/ withdrawals, investment in shares/ debentures/ time deposits/ mutual funds, credit card expenses, purchase of foreign exchange, transaction in immovable property etc.

What are the exact tax laws in this regard?
As envisaged in the tax laws, banks are required 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 Statement of Financial Reporting (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 account holder. This enables the taxman 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.
Thus, as cash deposits and withdrawals of Rs 10 lakh or more in a bank account in a financial year are required to be reported to the tax authorities, you need to be careful if you are exceeding the prescribed threshold. This limit is Rs 50 lakh and more in case of current accounts.

Is interest earned from the savings bank account taxable?
Yes, subject to the condition the interest earned from savings bank account/s crosses a threshold limit. Any amount that is credited as interest on the savings bank account is considered as income earned by the account holder under the income tax rules. This needs to be disclosed under his/her Income tax return under the head Income from other sources while filing ITR.
It’s noteworthy that a deduction under section 80TTA and Section 80TTB can also be allowed on the interest earned from the savings account
Under Section 80TTA of the Income Tax Act, interest up to Rs 10,000 earned from all savings bank accounts is not taxable. If the interest earned from all these sources is more than Rs 10,000, then the extra amount comes under tax deduction.
In contrast, Section 80 TTB is specifically tailored for senior citizens. It allows them a more substantial deduction of up to Rs. 50,000 per year on interest income earned from Savings Accounts and fixed and recurring deposits.
Notably, TDS on savings bank interest is not deducted.

(The author, a veteran journalist/columnist, is Editor-in-Chief Straight Talk Communication. He is former Head of Corporate Communication & CSR and Internal Communication & Knowledge Management Departments of J&K Bank)

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