The Indian government has introduced new rules regarding cash withdrawals from bank accounts to curb black money and promote digital transactions. Under these rules, there are limits on the amount of cash that can be withdrawn from banks without incurring tax.
For most account holders, the limit is set at ₹1 crore in a financial year. If your withdrawals exceed this amount, you will have to pay a tax deducted at source (TDS).
Relief for Income Tax Return Filers
Individuals who file income tax returns (ITR) benefit from a higher threshold for cash withdrawals. For those who have filed their ITR for the previous three years, the TDS on cash withdrawals kicks in only if the total amount withdrawn exceeds ₹1 crore in a financial year. This provides significant relief to regular taxpayers who need to withdraw larger sums for legitimate purposes.
How Much TDS Will Be Paid
The TDS on cash withdrawals is calculated based on the total amount withdrawn within a financial year. For individuals who have filed their ITR, the TDS rate is 2% on the amount exceeding ₹1 crore.
However, for those who have not filed their ITR for the past three years, the TDS rate is higher. In such cases, a 2% TDS is applicable on withdrawals exceeding ₹20 lakh and 5% on withdrawals exceeding ₹1 crore.
Charges on ATM Transactions
Apart from TDS, there are already charges imposed on ATM transactions. Most banks allow a limited number of free transactions each month, typically between three to five, depending on the type of account and the bank’s policy.
Beyond this limit, banks charge a fee for each additional transaction. These charges can range from ₹20 to ₹25 per transaction for cash withdrawals and around ₹8 to ₹10 for non-financial transactions such as balance inquiries.
Conclusion
Understanding these rules is crucial for managing your finances effectively. Ensure you are aware of the withdrawal limits and TDS implications to avoid unexpected deductions from your bank account.
Regularly filing your income tax returns can provide some relief, allowing higher withdrawal limits without incurring additional taxes. Additionally, being mindful of ATM transaction limits can help you avoid unnecessary charges.
