A RBI appointed committee has recommended an increase in inter-change charges for all ATM transactions over Rs 5,000.

Drawing cash is set to become increasingly expensive as, according to a report, a Reserve Bank of India (RBI) appointed committee has recommended an increase in inter-change charges for all transactions over Rs 5,000 carried out on automated teller machines (ATMs) across the country, while the provisions under Finance Act, 2020 have been tightened to increase the tax deducted at source (TDS) on high value withdrawals from July 1, 2020 for those who have not been filing income tax returns (ITRs).

The government has tightened the provision under Section 194N in the Income Tax Act, 1961 by lowering the original threshold of cash withdrawal from Rs 1 crore to Rs 20 lakh to levy 2 per cent TDS, while withdrawal above Rs 1 crore will attract a TDS of 5 per cent for those who have not filed their ITRs for the past three years.

While individuals, Hindu Undivided Families (HUFs), Companies, partnership firms, LLPs, local authorities, Association of Persons (AOPs) and Body of Individuals (BOIs), who failed to file their ITRs during the last three years. will face TDS on cash withdrawals above the threshold limits from July 1, 2020, no TDS will be applicable on withdrawals by government bodies, banks including co-operative banks, business correspondents of a banking company, white-label ATM operator of any bank, farmers whom the Central Government specifies the commission agent or trader.

In order to promote digital economy in the country and discourage cash transactions, it has been recommended that charges for financial transactions through ATMs should be increased from Rs 2 to Rs 17, while for non-financial transactions from Rs 5 to Rs 7 at ATMs in all centres with a population of one million and above.

With charges on ATM transactions above permissible number of transactions are already in place, putting charges on transactions above Rs 5,000 will definitely discourage cash withdrawals and accelerate the government’s quest to make India a digital economy.