What is the New Cash Withdrawal Limit in India?

A specific tax is levied upon certain payments made wherein the tax is deducted right at the beginning, before the amount is received by the payee. This amount is deducted by the payer and payment could come in various forms such as a salary, a business transaction, an exchange of goods/services for money and even on bank transactions. Such tax deductions are called TDS or Tax Deduction at Source. 

 

The payer, which is the bank, has the complete right to deduct a certain fee or tax from the money you wish to withdraw from your bank account or from the credit you borrow from the bank. Along with this comes Section 194N of the Income Tax Act of 1961 which determines cash withdrawal limit that is to be abided by religiously.

A payer, when making a payment to an individual, is often required to deduct a certain amount from said payment as per the law stated in Section 194N of the Income Tax Act of 1961. Generally, this deduction does not touch an outrageous amount; it could go up to 2% of the total cash withdrawal from banks. However, in case of shirking any regulations set by the government, the deduction rate could go up to 5% with a decrease in the threshold of cash withdrawal limit as well. 

 

Certain limits are levied on smaller withdrawals made through banks and ATMs as well through the conduits of debit cards, credit cards or cheques. Additional charges and withdrawal fees are added to such extrications as well. Added to that is a cap on the maximum amount that you could withdraw in one day.

The Automated Teller Machine or the ATM allows you to withdraw a set amount of money for your personal use which is entirely to your discretion. Most ATMs ask you to insert a credit or debit card in the machine to read that card and determine the account and its subsequent details which will harbour the transaction primarily. You are asked to enter a withdrawal amount that suits your bank’s cash withdrawal limit, a code/pin number or you are asked to approve the transaction through a QR code or OTP sent to your phone. In short, the fundamental duty of an ATM is to help you access your funds.

 

As mentioned before, ATMs primarily initiate the withdrawal process with a debit card, credit card or ATM card. Without these cards, the withdrawal of money will not be possible. Moreover, each of these cards when used at the ATM come with subjective limits as to how much you may withdraw in one single day or transaction. 

 

Some credit cards set a 20% to 40% limit on your total credit limit that you could withdraw in the form of cash while the system of debit-card withdrawals runs a little complicated with additional fee, a limit of free withdrawals and different cash withdrawal limits based on factors such as region of withdrawal or the type of debit card the user holds.

Credit cards allow cardholders to withdraw cash in addition to the feature of utilising credit up to a certain limit during transactions up to a permissible boundary that fulfils various requirements on the user’s end. These withdrawals can be made through ATMs, much like the regular ATM cash withdrawals, with the same interest and additional charges attached. 

• Cash Withdrawal Limit

Credit card cash withdrawal limit refers to the maximum cash amount that you can withdraw with the help of a credit card. Most banks set 20% to 40% of the total credit amount allowed to the cardholder as the cash limit. This cash limit will be conveyed to you at the time of issuance. This limit is not the same across all credit card providers, all variants of credit cards and all consumer/user categories. Should the bank choose to, it may alter the cash withdrawal limit at its discretion. 

 

Oftentimes, banks may change cash withdrawal limits for individual users depending upon their spending and repayment habits or due to change in taxation laws and regulations. Usually, the cardholder will be informed about such changes via email, SMS or any other preferred communication method listed by the cardholder. 

Debit card users are allowed to utilise their card to not only perform transactions, but to also withdraw money or cash. ATMs are used in order to withdraw money through a debit card and the money is debited directly from existing funds in the account linked to that particular debit card. However, these debit cards come with a limit to how much money can be withdrawn through them. Some cardholders could be given a cash withdrawal limit from the bank per month or the bank could offer a limit imposed on a 24-hour basis. The withdrawal limits of five banks of the many banks that exist in the country are as follows.

• SBI Bank

SBI Bank allows its metro city cardholders 3 free withdrawals while users in other cities can enjoy up to 5 free withdrawals. The additional fee after one has exhausted their fee-free withdrawals is ₹5 for SBI ATMs and ₹10 non-SBI ATM withdrawals for every withdrawal made. The minimum daily cash withdrawal limit is ₹100 and maximum limit is ₹20,000. 

• Punjab National Bank

Metro cities are allowed 3 free ATM withdrawals while other cities can get up to 5 free withdrawals through debit cards. A charging fee of ₹10 is levied on other withdrawals. The cash withdrawal limit of classic cardholders is ₹25,000 while platinum cardholders can withdraw up to ₹50,000. 

• HDFC Bank

HDFC Bank debit card users can make five free transactions or withdrawals through their debit card after which they are liable to a fee. Foreign withdrawals are levied with a fee of ₹125. Depending on the type of card you use, your cash withdrawal limit could range from ₹10,000 to ₹25,000.

• ICICI Bank

ICICI Bank imposes a withdrawal fee of ₹5 for every ₹1000 withdrawn by a cardholder and should the withdrawal amount exceed ₹25,000, the fee increases to ₹150. The daily withdrawal limit is ₹50,000. 

• Axis Bank

Axis Bank levies a withdrawal fee of ₹21 for all withdrawals while its maximum cash withdrawal limit is ₹40,000 per day.

Cash withdrawals made directly from banks are usually made through cheque. When it comes to direct withdrawals like these, the bank takes into account various factors such as the location of the bank, the account type, branch or non-branch withdrawals, etc,.

• Cheque withdrawal limits differ for tier 1, tier 2 and tier 3 cities along with rural and semi rural areas as well. The cheque withdrawal limit per day is usually higher when it comes to metro cities since the expenses are higher in regions of such nature and hence, higher limits are set to accommodate those expenses. 

• Depending on the type of account you hold, your cheque withdrawal limit could differ. For instance, current account and priority savings account holders are given allowed withdrawal limits as compared to other basic savings accounts.

• Cheque withdrawal limits vary when it comes to branch withdrawals. Withdrawing from your home branch would allow you higher withdrawal limits while withdrawing through cheque from other branches could bring your withdrawal limit down.

• Should a friend or family member submit a cheque on your behalf for a withdrawal, the bank will allow them a limit lesser than your own for safety purposes. Regardless of the amount signed off on the cheque, the bank will only allow a third-party a limited amount to withdraw. 

 

Many Indian banks allow their account holders the right to withdraw up to ₹1 Lakh through cheque per day. However, this only applies for cheques that indicate self-use or self-addressal.

The introduction of Section 194N in the Union Budget of 2019 deducts tax at the source when it comes to withdrawals that exceed ₹1 crore in a given financial year. Should the withdrawing individual extricate the sum of ₹1 crore or more in parts through the financial year, the payer will only then deduct a taxable figure from the amount. 

 

For instance, should an individual withdraw ₹95,00,000 first and then extricate a further sum of ₹5,30,000 within the same financial year, the TDS shall be levied on the extended ₹30,000 only. 

 

TDS at the rate of 2% will be deducted from payments or withdrawals that exceed the ₹1 Crore mark within a single financial year. Hence, as per the example given previously, a tax amount of ₹600 will be deducted. 

 

However, the tax limit can be lowered to ₹20 Lakhs if the withdrawer has not filed an income tax return for three consecutive years. The TDS deduction rate of 2% would apply for withdrawals that sum up to ₹20 Lakhs and above while withdrawals that exceed ₹1 Crore will be levied with a 5% tax deduction rate. 

Section 194N of the Income Tax Act of 1961 applies to a banking company, a co-operative society that practises banking business and a post office. These institutions or entities pay a sum in total or in aggregation to another individual or institution that withdraws the aforementioned sum of money.  

 

Should the total amount, aggregated or not, through a financial year, exceeds ₹1 Crore, the payer is required to deduct a tax amount at the rate of 2% as TDS.

The payers, or the deductors of TDS, as per Section 194N of the Income Tax Act of 1961, are banks (private, co-operative and public) or a post office. These bodies provide payees with the money that they withdraw with an added deduction of TDS depending on the provisions as stated in the Income Tax Act of 1961. 

 

On the other hand, certain payees benefit from the provisions of Section 194N wherein they are not required to have their withdrawals cut off due to taxes. These include government entities, banks, banking company business correspondents, white label ATM operators, APMC (Agricultural Produce Market Company) traders, or any persons or entities notified to make the withdrawal by the government.