Income Tax News: If you think you can withdraw any amount from your bank account without facing tax implications, think again. Careful planning is required to avoid paying unnecessary taxes on large cash withdrawals. This article outlines how much cash can be withdrawn from your bank account in a financial year without incurring a tax deduction at source (TDS).
Cash Withdrawal Limits and TDS under Section 194N
Many people believe they can withdraw unlimited cash from their bank accounts for free. However, under Section 194N of the Income Tax Act, if a person withdraws more than Rs 20 lakh in a financial year, TDS will be applicable. This rule applies to individuals who have not filed Income Tax Returns (ITR) for three consecutive years. Such individuals will have to pay TDS if they withdraw more than Rs 20 lakh from any bank, cooperative, or post office.
Relief for ITR Filers
Those who regularly file their ITRs enjoy more lenient rules. These individuals can withdraw up to Rs 1 crore in cash in a financial year from their bank, post office, or cooperative bank account without incurring TDS.
For withdrawals exceeding Rs 1 crore, TDS is deducted at a rate of 2%. For individuals who have not filed ITR for the last three years, the TDS rates are stricter: 2% TDS on cash withdrawals over Rs 20 lakh and 5% TDS on withdrawals exceeding Rs 1 crore.
ATM Transaction Charges
In addition to TDS, banks also charge fees for exceeding the prescribed limits on ATM withdrawals. Since January 1, 2022, the Reserve Bank of India (RBI) has increased the service charge for excess ATM withdrawals to Rs 21 per transaction, up from the previous Rs 20. Most banks offer five free transactions per month from their ATMs and three free transactions from other banks’ ATMs. In metro cities, only three free transactions are allowed from your own bank’s ATMs.
Understanding these rules is crucial for effectively managing your finances. By planning your cash withdrawals carefully, you can avoid paying unnecessary taxes and fees, ensuring that more of your money remains in your hands.
In summary, being aware of the limits and associated costs of cash withdrawals can save you from unexpected expenses. Whether you are a regular ITR filer or not, knowing these details helps you plan better and avoid financial pitfalls.
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