The ₹10 Lakh Rule for Cash Deposit Explained

Every day, millions of Indians walk into their banks to deposit cash, sometimes a few thousand rupees, sometimes several lakhs. According to recent RBI data, savings and current account cash deposits alone grew by over ₹3.7 lakh crore in a single quarter, while currency held by the public has touched record highs. These figures reveal just how central cash remains in our economy, despite the rapid rise of digital transactions.

With such large volumes moving through the system, it is natural that regulators set thresholds to keep track of unusually high deposits. One such threshold is popularly known as the ₹10 Lakh Rule, a benchmark at which banks are required to notify the Income Tax Department of cumulative cash deposits in a savings account during a financial year.

For customers, this does not mean restrictions on depositing their own money. It simply means that larger deposits are watched more closely for compliance and transparency. Understanding how this rule works and what it means for day-to-day banking helps customers manage their accounts with confidence.

The ₹10 Lakh Cash Deposit Rule

At the heart of the discussion lies the widely known ₹10 Lakh Rule. Under current regulations, if the total cash deposits in a savings account exceed ₹10 lakh during a financial year, the bank is required to report this activity to the Income Tax Department.

It is important to emphasize that this rule does not cap deposits at ₹10 lakh, nor does it imply that tax will be automatically levied once the threshold is crossed. Rather, it is a reporting mechanism that ensures unusually high volumes of cash are visible to regulators. Customers can continue to deposit amounts above ₹10 lakh freely, provided these funds are legitimate and supported by appropriate documentation.

Key Regulatory Requirements

Beyond the annual ₹10 lakh reporting threshold, customers should also be aware of a few additional compliance rules that apply to cash transactions:

• PAN Requirement
  Any single cash deposit of more than ₹50,000 must be accompanied by a Permanent Account Number (PAN) or, in its absence, Form 60. This ensures the source of funds is traceable.
• Section 269ST of the Income Tax Act
  This provision prohibits acceptance of ₹2 lakh or more in cash from one person in a single day, even if split across multiple transactions. Any violation may attract penalties equal to the transaction value.
• Bank Monitoring Norms
  In line with RBI’s directives, banks are obliged to keep a close watch on deposits and withdrawals of ₹10 lakh or more. Such monitoring is part of broader efforts to curb money laundering and unaccounted transactions.

Cash Deposit Limits: Regulatory Objectives

Why do these rules exist? At a broad level, they serve three important purposes:

1. Promoting transparency: By ensuring large cash deposits are reported, regulators gain better visibility into high-value transactions.

2. Strengthening compliance: These thresholds align with global Anti-Money Laundering (AML) and Know Your Customer (KYC) frameworks, protecting the financial system from misuse.

3. Safeguarding customers: When transactions are properly documented, customers themselves are better protected against future scrutiny or disputes.

In essence, the rules are not barriers, they are safeguards, designed to balance customer freedom with accountability.

Customer Guidelines

For most customers, these rules will rarely cause inconvenience. However, a few practical steps can help ensure smooth transactions when dealing with larger sums:

• Keep your PAN updated: Linking your PAN with your account prevents delays or rejections when making high-value deposits.
• Maintain documentation: Retain receipts, salary slips, property sale deeds, or gift deeds for any significant deposit. This provides clarity in case regulators request proof of source.
• Prefer digital channels: For amounts running into lakhs, electronic transfers through NEFT, RTGS, IMPS, or UPI are faster, safer, and beyond the scope of cash-related restrictions.
• Seek guidance when in doubt: If you are planning a substantial deposit, your branch representatives can advise you on the documentation required and the best way to process the transaction.

Cash Deposits vs. Digital Transactions

While the ₹10 Lakh Rule specifically addresses cash deposits, it is worth noting that the banking system increasingly encourages digital modes of transfer for larger sums. The reason is simple: digital transactions are automatically recorded, leaving a transparent audit trail that reduces the need for additional reporting.

For customers, this means fewer procedural requirements. A transfer of ₹5 lakh through NEFT or RTGS does not raise the same compliance concerns as a similar deposit in cash. Similarly, UPI and IMPS have made high-value transfers faster and more convenient, often completed in real time. In contrast, large cash deposits require PAN documentation, may fall under reporting obligations, and could attract additional queries if not properly supported by records.

This does not mean that cash deposits are discouraged. Many individuals still rely on cash for personal, cultural, or practical reasons. However, for those dealing with high-value amounts such as proceeds from property transactions, business receipts, or large gifts, choosing digital channels ensures smoother processing.

From the bank’s perspective, encouraging digital transactions also reduces risks associated with counterfeit currency, handling costs, and the security challenges of moving physical cash. For the customer, it means speed, safety, and compliance assurance.