Query about cash withdrawals and tax/ITR filing implications

Sec 269st deals with these provisions.

SEC 269ST IMPOSES RESTRICTIONS FOR WITHDRAWAL OF CASH OR RECEIVING CASH FROM SPECIFIED COMPANIES.

Will attract TDS

Will be reported in SFT

Notice Might trigger from ITAX for source of fund

If scruitiny comes & if u can explain then there is no issue

I had answered possible outcome of reporting Cash transaction never said u can not withdraw

As far as things are as per incometax law and explainable then fine

A withdrawal from a savings account is not, by itself, taxable income and does not create an ITR filing obligation. The key cash-withdrawal TDS rule is section 194N: a bank generally deducts TDS at 2% on cash withdrawals exceeding ₹1 crore in a financial year. For a person who has not filed the required returns for the preceding three assessment years, the lower threshold is ₹20 lakh, with 2% TDS on withdrawals above ₹20 lakh up to ₹1 crore and 5% above ₹1 crore. The rule applies to aggregate withdrawals from the relevant bank, not a daily limit; splitting withdrawals across days does not avoid it. On the stated figures, neither person’s proposed withdrawals should attract section 194N TDS, assuming no other withdrawals that take them across the applicable threshold.

• There is no general ₹2 lakh-per-day ceiling on withdrawing one’s own cash from a bank account. Section 269ST’s ₹2 lakh restriction concerns receipt of cash, not a depositor withdrawing cash. Banks may still apply their own operational checks.
• The person who does not file ITR is not required to file merely because they withdraw ₹5 lakh. ITR filing depends on income and other statutory conditions, not withdrawal amount.
• Keep bank statements and, where relevant, records showing the source and intended use of the cash. A later cash payment or receipt may have separate restrictions; for example, section 269ST can restrict receiving ₹2 lakh or more in cash in specified circumstances.
• Confirm each person’s aggregate cash withdrawals in the financial year and the other person’s return-filing history, since those facts determine whether section 194N applies.

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Correction first: Sec 269ST does not apply here. It restricts receiving cash of Rs 2 lakh or more from a person, and receipts from a banking company or post office are expressly excluded. Withdrawing your own money from your bank is not covered.

What does apply: TDS on cash withdrawal

• Up to 31.03.2026 (Sec 194N): 2% on withdrawals above Rs 1 crore a year. For a person who has not filed returns for the last 3 years: 2% above Rs 20 lakh and 5% above Rs 1 crore.

• From 01.04.2026 (Sec 393(3), Income-tax Act, 2025): 2% above Rs 1 crore. The non-filer rule has been dropped.

• The threshold is an annual aggregate across all accounts with that bank. Withdrawing Rs 2 lakh a day does not avoid it.

• TDS is not a cost: the non-filing parent can file a return and claim it as refund.

Reporting and scrutiny

• Large cash withdrawals are reported to the department and appear in AIS. Since the funds are already-taxed savings, keep a note of the purpose (medical, family function) and the bank statements.

• Whoever receives the cash from them for a single event must not receive Rs 2 lakh or more; that is where Sec 269ST bites (penalty equal to the amount, Sec 271DA).

• Prefer bank transfer to the payee wherever possible.