Desk
Share
We all have this question at one point or another in our lives: What is the upper limit of money I can keep in my savings bank account. Will I be taxed or fined if my account maintains a certain balance? Let's understand what you need to consider.
A Pleasant Surprise: No Keeps on Your Savings Account
First of all, the Reserve Bank Of India (RBI) has not mandated a minimum limit to the total amount you can keep in your savings account. Practically, you can place as much money as you require. It highly depends on an individual’s personal savings and finances, or may be the policies of the specific bank, though these rarely impose a strict limit.
There’s No Official Limit, But… Large Balances Will Send Alarm Signals
While there is no formal cap placed by the RBI, banks are usually not too pleased with observing an unusual amount of money left unutilized in a savings account over an extended period of time. More significantly, large amounts or deposits can draw unwanted scrutiny from tax authorities.
Everything You Need To Know About Tax:
Now this is a fundamental point:
Could You Get An Income Tax Assessment Notice?
This will be possible. If the amount shown in your bank account seems unusually high for his declared income or his standard “sprofile”, the Income Tax Department may raise a notice. This will require the explanation of the source of money. That's why having proper documentation is important in case such large balances or deposits need to be justified.
Excess of anything isn't good:
In addition to the aforementioned reason due to tax scrutiny, crediting excess funds in a savings account represents a simple financial flaw of earning potential and interest. These accounts offer a very low rate of interest, usually between 2.5 and 4 percent. Other options like Fixed Deposits, mutual funds, or other ventures have the tendency to yield greater returns than such accounts. Letting large sums sit in a savings account will not only restrict one to low profits but also cause greater revenue loss in other accounts (this is called opportunity cost.)
Summarily:
While is best not to withdraw cash from your savings account, people should keep readily accessed funds for immediate use while funds meant for long term should be wisely invested elsewhere.
