Normally, we feel very confident of withdrawing the money which is lying in our bank account anytime.
But while doing so, you will have to plan the withdrawal carefully again so that you can avoid paying unnecessary tax.
Here it is very important to know how much amount can be withdrawn in a year without paying tax.
This is due to the fact that the rule of paying a fee for withdrawing money more than the prescribed limit is not only applicable to ATM transactions but a similar rule is also applicable for withdrawing money from the bank.
How Much Cash Can Be Withdrawn Without Paying Tax?
So far, people thought that they could withdraw as much cash as they want from their bank account for free.
But now this ought to change as if a person withdraws more than Rs 20 lakh in a financial year, then he will have to pay TDS, under section 194N of the Income Tax Act.
There is a catch, as this rule is only for those people who have not filed Income Tax Return (ITR) for 3 consecutive years.
So, these people will have to pay TDS if they withdraw more than Rs 20 lakh from any bank, cooperative or post office.
How Can This Be Avoided?
This appears to be a brilliant idea for those who file income tax returns as they get more relief under this rule.
Further, tense customers can withdraw up to Rs 1 crore in cash in a financial year from their bank, post office or co-operative bank account that too without paying a dime.
But, if they withdraw more than Rs 1 crore from your bank account then TDS will be deducted at the rate of 2 percent, under this new rule.
So in case you haven’t filed ITR continuously for the last three years, then you will have to pay 2 percent TDS on cash withdrawal of more than Rs 20 lakh and 5 percent TDS on withdrawal of more than Rs 1 crore.
We already know that banks charge a fee for withdrawing money more than the prescribed limit from ATMs.
This was implemented when RBI increased the service charge on withdrawing cash from ATMs from January 1, 2022.
Presently, these banks are charging Rs 21 for transactions exceeding the prescribed limit.
There is a change from the earlier fee as the account holders have to pay Rs 20 for this transaction.
Please note here that most banks provide five transactions free every month from their ATMs.
Besides this they also provide three transactions free from ATMs of other banks.
In the case of metro cities, it changes as their banks allow you to withdraw money free only three times from your own bank.
