Cash withdrawal 3 lakh from one account, then cash deposit in another account, will create any problem?

@garg.pulkit131 @anitabhadra @AkashJhaveri @CA_Jayni_Bhavsar @Surbhi_Pal

Hello tax experts kindly help me pls :pray: :pray:

Due to some circumstances, I need to keep cash ready with me so I’m going to withdraw 3 lakh from my one account , but there is a good chance that money may get unused , so I will deposit in my another account 1 lakh, 3 times on different days.
FYI that 3.5 lakhs I have as FD from many years that I accumulated slowly , also got from LIC policy. But income is almost nil.

  1. Will this create any problem in income tax?
  2. Can I get ITD Notice?
  3. How much Max money should I withdraw and deposit with this procedure ? I want 3.5 lakhs approx.
  4. Can Bank ask for proof at the time of cash deposit ?
  5. Can Bank report to IT Dept. even if I deposit 1 lakh per day for 3-4 times ? If yes, will that be a problem for me ?
  6. What if I don’t do this together but split it across some 2-3 months like first cash withdrawal 70,000 , then cash deposit same amount in another bank , then again same process 2-3 times more.
    FYI cash withdrawal and deposit amount will be same and gap will be one day only between those transactions.

Hi @harshn ,

As per the provision of section 285BA of Income Tax Act, Banks are required to report all such PANs to Income Tax Act wherein the cash deposits in other than current account is > 10 Lakhs in a Financial Year.

However, banks ask for the PAN of the person even if the deposit is 50,000 rupees or more in a single day as per the provisions of Rule 114B of Income Tax Act. Thus in your case even though it may not be reported by the bank under SFT but since the deposit amount exceeds 50,000 bank would definitely ask you to furnish PAN.

As long as the cash accumulated is from the income/source on which tax has already been paid wherever applicable, you need not worry about it.

Hello @garg.pulkit131 sir,

  1. Consider only for savings account and not current.
  2. U assume that I deposit in multiples of 49,000 each day. (So as to avoid PAN report)

Now and my main query withdrawing x amount from one savings account , then depositing that same x amount in another bank account of mine after some time(1-2 days) 49,000/day , :

  • 1. will not create any problem or be wrong in view of Income Tax Dept?
  • 2. Can I get notice for same ?
  • 3. Will Income Tax dept think/assume that my income is x amount more than other cash deposit in whole financial year? Means income tax will only consider cash deposited and not the fact that same deposit has been made just after withdrawal from another bank account ?
  • Hey @harshn

    Reporting requirement prescribed in the law for bank are different for current and savings account. Here are the answers to your concern:

    1. You should not be worried about this as these questions might be raised only if the return is selected for scrutiny. Moreover, as long as you are able to justify, or would not create any problem.

    2. & 3. Depends on what criteria is being used by the Income Tax Department for sending notices. But again reiterating what I mentioned above, this should not be of concern as long as you can explain the same during the course of any assessment proceedings, if any.

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