Know the TDS Rules for Tax Filers

Know the TDS Rules for Tax Filers

Tax rules on cash withdrawals 

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Your money in a bank account is subject to rules, so it is important to know how much you can withdraw without facing tax issues. If you think you can withdraw your money anytime without any problems, think again. You will need to plan your withdrawals carefully to avoid paying extra taxes. Make sure you know the annual withdrawal limit to avoid paying taxes. 

Tax on Cash Withdrawals

According to Section 194N of the Act, TDS must be deducted if the total amount withdrawn in cash by a person in a particular financial year exceeds a certain limit.

  • If you withdraw more than Rs 20 lakh in a financial year and haven't filed Income Tax Returns (ITR) for the last three consecutive years, you will have to pay TDS (Tax Deducted at Source).
  •  If you have filed ITR regularly, you can withdraw up to Rs 1 crore in cash per year without paying TDS.

TDS Rates

  • If you withdraw more than Rs 1 crore in cash and haven't filed ITR for the last three years, 5% TDS will be deducted.
  • Otherwise, the TDS rate is 2% for withdrawals exceeding Rs 1 crore.

ATM Transactions

  • Banks charge a fee for ATM transactions exceeding the monthly limit. The current charge is Rs 21 per transaction above the limit (previously Rs 20).
  • Typically, banks offer five free ATM transactions per month at their own ATMs and three free transactions at other banks' ATMs. In metro cities, the free transactions at own ATMs are limited to three per month.

Who is Exempt from TDS on Cash Withdrawals?

  • Central or state government.
  • Private or public sector bank.
  • Any cooperative bank.
  • Post office.
  • Business correspondent of any bank.
  • White label ATM operator of any bank.
  • The central government has designated commission agents or traders, who operate under the Agriculture Produce Market Committee (APMC), to handle payments to farmers for the purchase of agricultural produce.
  • Authorized dealers, their franchise agents, sub-agents, and Full-Fledged Money Changers (FFMC) licensed by the RBI, along with their franchise agents.
  • Any other person designated by the Government in consultation with the RBI.

If you withdraw large amounts of cash, ensure you've filed your income tax returns to avoid or minimize TDS. Also, be mindful of ATM transaction limits to avoid extra charges.

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