The Income Tax Department of India has notified the Income-tax Rules, 2026, effective from April 1, 2026. A common misunderstanding among taxpayers is that these rules impose blanket banking caps; in reality, they are primarily reporting thresholds under the Statement of Financial Transaction (SFT). The SFT is a mechanism through which taxpayers disclose material financial transactions to the department via Form 61A, with filings generally due by May 31 after the financial year ends. This data feeds into the taxpayer’s Annual Information Statement (AIS).
Key Reporting Thresholds for 2026
The SFT triggers are data-driven. Banks must report:
- Cash deposits or withdrawals of ₹50 lakh or more in one or more current accounts during a financial year.
- Cash deposits of ₹10 lakh or more in accounts other than current accounts and time deposits (e.g., savings accounts).
- Time deposits of ₹10 lakh or more.
- Credit card bill payments of ₹1 lakh or more in cash, or ₹10 lakh or more by other modes.
- Property transactions of ₹30 lakh or more.
- For tax-audited businesses, cash receipts above ₹2 lakh for the sale of goods or services not already covered elsewhere.
Why PAN Matters More Than Ever
Tax compliance is increasingly tracked via PAN, which helps the department link tax payments, TDS/TCS credits, returns, and specified transactions. PAN is mandatory for opening most bank accounts and for cash deposits exceeding ₹50,000 per day. Where PAN is unavailable, Form 60 may be used. Importantly, the SFT framework requires reporting entities to aggregate all accounts of the same nature held by a person during the year and attribute joint-account values to all holders. Splitting cash across multiple accounts does not reliably avoid reporting.
TDS on Cash Withdrawals and Additional Restrictions
Large cash withdrawals trigger a second compliance layer. Under Section 194N, banks, cooperative banks, and post offices must deduct TDS at 2% or 5%, depending on the taxpayer’s filing history and withdrawal level. For regular return filers, the key threshold is ₹1 crore in a year; for specified non-filers, TDS can begin once cash withdrawals cross ₹20 lakh.
Taxpayers should not confuse SFT reporting with separate anti-cash rules. Section 269ST restricts receiving ₹2 lakh or more in cash in specified cases, and Section 40A(3) can disallow business cash expenses above ₹10,000 per day per person.
Why This Matters
The true risk is not crossing a threshold by itself—it is crossing a threshold without an income trail that matches your return. The AIS now displays SFT information reported by banks and other institutions, and the department advises taxpayers to review their AIS, update the Taxpayer Information Summary where needed, and file returns only after checking for errors to avoid notices due to mismatches.
What Taxpayers Should Do Now
- Review your AIS and Taxpayer Information Summary before filing returns.
- Ensure all high-value transactions are backed by declared income.
- Keep PAN details updated across all accounts and transactions.
- Consult a tax professional if you anticipate crossing any reporting thresholds.
Frequently Asked Questions
1. Are these transaction limits or reporting limits?
Most high-value financial thresholds under SFT are reporting limits, not direct restrictions on banking transactions. Crossing a threshold means banks or institutions may report the transaction to the Income Tax Department.
2. What are the key cash deposit reporting limits in 2026?
Cash deposits of ₹10 lakh or more in savings-type accounts are reportable under SFT. For current accounts, cash deposits or withdrawals of ₹50 lakh or more in a financial year must be reported.
3. Why is PAN important for high-value transactions?
PAN helps the Income Tax Department link bank accounts, TDS/TCS credits, returns, and specified transactions. Splitting money across accounts may not avoid reporting as transactions are aggregated by PAN.
4. When does TDS apply to cash withdrawals?
For regular return filers, TDS under Section 194N generally applies when cash withdrawals exceed ₹1 crore in a year. For specified non-filers, TDS can begin after withdrawals cross ₹20 lakh.
5. How should taxpayers avoid notices from AIS mismatches?
Taxpayers should review their AIS and Taxpayer Information Summary before filing returns. The main risk is not crossing a threshold, but having high-value transactions that do not match declared income.