Bank Account Transaction Limit Starting From 1st April 2026 with New Tax Rules

Overview

For the financial year 2026-27 (Assessment Year 2027-28), the new Income Tax Act, 2025, along with the Draft Income Tax Rules, 2026, introduces significant updates to the limits governing banking and cash transactions. These revised regulations aim to simplify compliance for everyday financial activities while strengthening oversight of high-value transactions. 

Key Limits and Reporting Thresholds

Below are the key limits and reporting thresholds effective from April 1, 2026: 

Revised PAN Quoting Thresholds under Draft Rules 2026

The government has proposed updated monetary thresholds mandating the furnishing of PAN for various banking and financial transactions: 

• Cash Deposits or Withdrawals: PAN will now be required if the total amount deposited or withdrawn in cash exceeds ₹10 Lakh across all bank accounts during a financial year. This marks a shift from the earlier norm, which was triggered by a single-day deposit of ₹50,000 . 
• Property Transactions: The threshold for quoting PAN in property-related deals has been doubled to ₹20 Lakh , compared to the previous limit of ₹10 Lakh . 
• Vehicle Purchases: PAN is now mandatory for the purchase of any vehicle, including two-wheelers, if the price exceeds ₹5 Lakh . Previously, twowheelers were exempt from this requirement. 
• Hotel, Travel, and Event Payments: Payments made for hotels, travel, or event bookings will require PAN if the amount exceeds ₹1 Lakh , raised from the earlier limit of ₹50,000 . 

SFT Reporting Limits: Bank-to-IT Department Communication

Banks are now obligated to report specified high-value transactions to the Income Tax Department through the Statement of Financial Transactions (SFT). These reported transactions will subsequently be reflected in the account holder's Annual Information Statement (AIS).

The following table outlines the updated reporting thresholds for the financial year: 

TDS on Cash Withdrawals under Section 194N 

Tax Deducted at Source (TDS) is applicable on cash withdrawals from bank accounts when the total amount withdrawn in a financial year surpasses specified limits. The rates vary based on the individual's income tax filing history: 

For Individuals who file Income Tax Returns (Regular Filers): 

• TDS at 2% is applicable on the amount of cash withdrawals exceeding ₹1 Crore in a financial year.

For Individuals who have not filed Returns for the past 3 years (Non-Filers): 

• TDS at 2% is deducted on cash withdrawals exceeding ₹20 Lakh. 
• TDS at a higher rate of 5% is deducted on the portion of withdrawals that exceeds ₹1 Crore. 

General Cash Transaction Restrictions (Sections 269ST & 269SS) 

The Income Tax Act imposes strict limits on the use of cash for various transactions to discourage unaccounted money. Key restrictions include:

Cash Receipt Limit (Section 269ST): No individual or entity is permitted to receive a cash sum of ₹2 Lakh or more: 

• From a single person in a single day;
• In respect of a single transaction; or 
• In respect of transactions relating to one event or occasion. 
• Penalty: Violation attracts a penalty equal to 100% of the cash amount received. 

Loans and Deposits (Section 269SS): It is prohibited to accept or repay any loan or deposit amounting to ₹20,000 or more in cash. 

Disallowance of Business Expenses: Any business expense paid in cash exceeding ₹10,000 in a single day to a particular individual shall not be allowed as a deductible expenditure while computing taxable income. 

Digital Transaction Limits (UPI) 

While Unified Payments Interface (UPI) transactions do not have a specific "tax limit" for compliance purposes, the following operational ceilings are generally applicable: 

Standard Transaction Limit: The default per-transaction cap for most UPI payments is ₹1 Lakh. 

Enhanced Category Limits: Higher transaction limits have been permitted for specific sectors to facilitate larger digital payments. These include enhanced caps of up to ₹5 Lakh (and in certain cases, ₹10 Lakh) for payments made to: 

• Hospitals 
• Educational institutions 
• Initial Public Offerings (IPOs) 
• RBI Retail Direct schemes 

Important Note: 

Although the Draft Rules 2026 are designed to ease day-to-day compliance - such as relaxing the daily PAN reporting threshold of ₹50,000, the tax department continues to monitor high-value transactions comprehensively through the Statement of Financial Transactions (SFT). It is essential to ensure that any significant deposits or payments are consistent with the income disclosed in your Income Tax Return (ITR) to avoid unnecessary scrutiny or notices.