With the rollout of the Income Tax Rules, 2026 under the revamped Income Tax Act, 2025, the government has introduced a significant change in how savings bank account transactions are monitored. Moving away from the earlier system of tracking daily cash transactions, the new framework focuses on annual aggregate limits, bringing a more streamlined and practical compliance structure for taxpayers.
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Annual Cash Deposit Threshold Replaces Daily Caps
Under the new rules, the emphasis is now on the total cash deposited during a financial year rather than individual deposits made on a single day. A threshold of ₹10 lakh per year has been set for cash deposits across savings accounts.
This means that instead of triggering scrutiny for a one-time large deposit, banks and authorities will now monitor the cumulative cash activity over the entire year. Once this threshold is crossed, the transaction details are reported to tax authorities through the Statement of Financial Transactions (SFT) system.
What Transactions Are Covered Under the Limit
The ₹10 lakh annual limit applies strictly to cash deposits. It does not include non-cash or digital transactions, which have been deliberately excluded to promote transparency and digital payments.
Transactions covered include deposits made in physical cash at bank branches or ATMs. However, common banking activities such as salary credits, online transfers through NEFT, RTGS, IMPS, UPI, and cheque deposits are not counted toward this threshold.
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PAN Requirement Linked to Annual Activity
Another important change is the linking of PAN requirements to annual cash activity. Under the revised rules, individuals must furnish their PAN if their total cash deposits or withdrawals exceed ₹10 lakh in a financial year.
Previously, PAN was required for individual transactions above ₹50,000. The new approach aligns documentation requirements with overall financial behaviour, rather than isolated transactions.
No Restriction on Account Balance
The updated rules also clarify a common misconception regarding savings accounts. There is no upper limit on the amount of money an individual can hold in a savings account.
The ₹10 lakh cap applies only to cash deposits, not to the balance maintained. This ensures that individuals with legitimate income and savings are not unnecessarily restricted.
Continued Reporting Through SFT Framework
Banks will continue to report high-value transactions under the SFT mechanism, ensuring transparency and regulatory oversight. While the threshold for savings accounts remains ₹10 lakh annually, higher limits apply to other account types, such as current accounts used by businesses.
This system enables tax authorities to identify discrepancies, detect unexplained income, and curb potential tax evasion more effectively.
Existing Cash Restrictions Still Remain
It is important to note that the new rules do not replace existing provisions relating to cash transactions. For instance, Section 269ST of the Income Tax Act—which restricts receipt of ₹2 lakh or more in cash in a single day from a person—continues to apply.
Therefore, both annual monitoring and daily cash restrictions will operate simultaneously.
Taxability of Savings Account Interest
Interest earned on savings bank accounts remains fully taxable under the head “Income from Other Sources.” However, taxpayers can claim deductions under:
- Section 80TTA (up to ₹10,000 for non-senior citizens)
- Section 80TTB (up to ₹50,000 for senior citizens)
This aspect of taxation remains unchanged despite the new compliance framework.
Impact on Taxpayers and Banking Behaviour
The introduction of annual limits is expected to make routine banking smoother by reducing unnecessary compliance triggers for small or occasional deposits. At the same time, it strengthens the system’s ability to monitor large-scale cash activity over time.
Taxpayers are advised to ensure that their cash deposits are consistent with declared income and to maintain proper records for any significant cash transactions.
Conclusion
The transition from daily caps to annual limits under the Income Tax Rules, 2026 represents a balanced approach to financial monitoring. It simplifies compliance for ordinary account holders while enhancing the government’s ability to track and verify high-value cash transactions.
In essence, the new regime makes everyday banking easier—but ensures that large cash movements do not go unnoticed.
