TDS on Cash Withdrawal (Sec 194N of IT Act 1961)

TAX DEDUCTION AT SOURCE ( TDS )  ON CASH WITHDRAWAL

( After Amendment in Sec 194N of the Income Tax Act, 1961 )

Section 194N at Glance

Illustration/Example to clearly understand the above chart/provision:

Payers :- Bank / Post Office / Co -operative Societies
Mr. X – Filed all his Returns Mr. Y -Not Filed his returns for 3 preceding Assessment years

AY [ 2019-20, 2018-19 & 2017-18]

FY [ 2018-19.2017-18 & 2016-17]
Cash Withdrawal upto Rs 1 crores Cash Withdrawal more than Rs 1 crores Cash Withdrawal

20 Lakhs to 1 Crore

 Cash Withdrawal more than Rs 1 crores
No TDS TDS @ 2% TDS @ 2% TDS @ 5%

 

Frequently Asked Questions (FAQ’s)

 

  1. Effective date of 194N:- 01.09.2019
  2. Who will Deduct TDS :- The person (payer) making the cash payment will have to deduct TDS under Section 194N. Here is the list of such persons:                                                                                                                 Any bank (private or public sector)A co-operative bankA post office
  3. When TDS to be deducted : TDS under Section 194N tax shall be required to be deducted only when the aggregate amount of cash withdrawal during the previous year by a person from one or more of his bank or post office account, as the case may be, exceeds Rs. 20 Lakhs and the said person has not filed his Income Tax Returns for last three years . Further, the tax shall be required to be deducted only on the amount exceeding Rs. 20 Lakhs
  4. Applicability : The section will apply to withdrawals made by following taxpayers:-
    • An Individual
    • A Hindu Undivided Family (HUF)
    • A Company
    • A partnership firm or an LLP
    • A local authority
    • An Association of Person (AOPs) or Body of Individuals (BOIs)
  5. Non Applicability : Sec 194N  will not apply to withdrawals made by following taxpayers:-
    1. Government Body
    2. Bank including co-operative banks
    3. Business correspondent of a banking company
    4. White label ATM operator of any bank
    5. Farmers – Central Government specifies the commission agent or trader, operating under Agriculture Produce Market Committee (APMC) – Notification No. 70/2019-Income Tax Dated 20th September, 2019
    6. CBDT exempts cash withdrawal by the authorised dealer and its franchise agent and sub-agent; and Full-Fledged Money Changer (FFMC) licensed by the Reserve Bank of India and its franchise agent from TDS under Section 194N subject to conditions specified in Notification No. 80/2019-Income Tax dated 15th October, 2019.
  6. Effective date of Amendment:-   Amendment of Section 194N will be with effect from 01 July 2020
  7. RATEs – Pre and Post AmendmentThe change being:
    S. No. Person (Recipient) who has: Exemption Rs Till 30-6-2020 From 1-7-2020
    1 Filed the returns of income for all of the three assessment years relevant to the three previous years cash withdrawals exceeding 1 cr 1 cr 2% 2%
    2. Not Filed the returns of income for all of the three assessment years relevant to the three previous years: 1 Cr till 30.06.2020 and 20 lakhs wef 01.07.2020  

     
    Cash withdrawals from 20 Lakhs to 1 Cr 2% 2%
    Cash withdrawals exceeding 1 cr 2% 5%

    AB & Co Comments: There are various clarifications which needs to be addressed.