Cash Withdrawal Limit: If you frequently withdraw large sums from your savings account, this news is important for you. The Income Tax Department is now keeping a strict watch on bank transactions. Recently, several cases have come to light where people have received tax notices for repeatedly withdrawing or depositing large sums.
Banks send reports on every transaction
Earlier, people believed that withdrawals from savings accounts were tax-free, but this is no longer the case. Banks send reports of every large cash transaction directly to the Income Tax Department. If a person has unusually high cash flow in their account or a transaction does not match their income, the department may ask for an explanation.
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Alert on Exceeding the Limit
Each bank has its own cash withdrawal limit. For example, HDFC Bank offers free cash withdrawals of up to ₹1 lakh per month. After that, a charge of ₹150 is levied. If you repeatedly withdraw more than this limit, the bank may consider this unusual activity and send this information to the tax department.
When do you receive an Income Tax Notice?
The Income Tax Department sends a notice only when it believes that the amount of money coming into or going out of a person’s account exceeds their declared income. The department may ask the person for the source of the transaction and proof of the transaction. If answers or documents are not provided, tax penalties may be imposed. Therefore, it is extremely important to keep a record of every transaction.
Cash Deposits Also Monitored
The department monitors not only cash withdrawals but also large deposits. If a person deposits Rs 10 lakh or more in cash into their savings account in a financial year, the bank sends this information to the Income Tax Department. The department then compares the person’s income and expenses. If a discrepancy is found, a notice may be sent.
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Ways to Avoid Income Tax Notices
The simplest way to avoid tax notices is transparency. Clearly identify the source of every cash transaction and preserve the necessary documentation. If you received money from a business or transaction, keep records of it. It’s always beneficial to consult your bank or tax advisor before making any major transactions.