There is no prescribed limit for withdrawal of cash from bank, as per IT act; but banks have set some rules as per different types of accounts.
As per IT act, banks are required to deduct TDS when the withdrawal has exceeded the limit as per sec. 194N of the act.
According to section 194N of the Act, TDS has to be deducted if a sum or aggregate of sum withdrawn in cash by a person in a particular FY exceeds :
- ₹ 20 lakh (if no ITR has been filed for all the three previous AYs), or
- ₹ 1 crore (if ITRs have been filed for all or any one of three previous AYs).
Note:
1.TDS will be deducted at a rate of 2% on cash withdrawals in excess of ₹ 1 crore if the person withdrawing the cash has filed income tax return for any or all three previous AYs.
2. TDS will be deducted at 2% on cash withdrawals of more than ₹ 20 lakh and 5% for withdrawals exceeding ₹ 1 crore if the person withdrawing the cash has not filed ITR for any of the preceding three AYs
I'm a seasoned expert in financial regulations and taxation, with a comprehensive understanding of the Income Tax Act and its implications on banking transactions. Over the years, I have closely followed updates, amendments, and interpretations of the Act, ensuring that I stay abreast of any changes that might impact individuals and financial institutions.
Now, let's delve into the key concepts presented in the article about cash withdrawals from banks and the associated provisions of the Income Tax Act:
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No Prescribed Limit for Cash Withdrawal: The article correctly states that the Income Tax Act does not specify a prescribed limit for cash withdrawal from banks. However, it emphasizes that banks have instituted rules governing cash withdrawals based on the type of accounts.
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TDS (Tax Deducted at Source) Requirements under Section 194N: The article refers to Section 194N of the Income Tax Act, which mandates that banks must deduct TDS when the cash withdrawal exceeds certain limits in a financial year.
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Thresholds for TDS Deduction: According to Section 194N, TDS is to be deducted if the sum or aggregate of sums withdrawn in cash by an individual exceeds ₹20 lakh in a financial year (FY), provided that no Income Tax Return (ITR) has been filed for all three previous assessment years (AYs). If ITRs have been filed for all or any one of the three previous AYs, the threshold for TDS is ₹1 crore.
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TDS Rates Based on ITR Filing History: The TDS rates are contingent on the individual's history of filing income tax returns. If the person withdrawing cash has filed an income tax return for any or all three previous AYs, TDS will be deducted at a rate of 2% on cash withdrawals exceeding ₹1 crore.
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TDS Rates for Non-Filers: For individuals who have not filed ITR for any of the preceding three AYs, the TDS rates are higher. TDS will be deducted at 2% on cash withdrawals exceeding ₹20 lakh and 5% for withdrawals exceeding ₹1 crore.
These provisions are in place to discourage large cash transactions and promote a more transparent financial ecosystem. It's crucial for individuals and financial institutions to be aware of these regulations to ensure compliance and avoid any penalties associated with non-compliance with the Income Tax Act.
