Cash Below ₹10L? You Can Still Get an IT Notice

Many Indians think keeping cash deposits under ₹10 lakh keeps them safe from the Income Tax Department. That's a myth. The ₹10 lakh limit only decides when your bank must report — the taxman can still question you directly.

Here's what happened: Rule 114E requires banks to report cash deposits of ₹10 lakh or more in a year to the Income Tax Department via Statement of Financial Transactions (SFT).. This ₹10 lakh reporting threshold is NOT a safe zone — the IT Department can independently seek information about any deposit under Section 131, 132, or 133 of the Income-tax Act.. If your cash deposit looks inconsistent with your declared income — even at ₹3 lakh or ₹7 lakh — the IT Department can issue a notice and demand an explanation..

What you should do: Keep proof of the source of any large cash deposit — sale receipts, gift documents, withdrawal slips — regardless of the amount deposited.. Avoid splitting a large cash amount into multiple deposits across accounts or family members to stay under ₹10 lakh — this pattern (called structuring) raises red flags.. If you receive a cash gift, inheritance, or sale proceeds, consult a CA before depositing and file the correct ITR disclosing the source clearly..

The IT Department cross-matches your bank deposits with your ITR using the Annual Information Statement (AIS). Check your AIS on the IT portal before filing — surprises are costly.

For readers weighing their credit and loan options, our personal loan guide and CIBIL score resources put this update in context.