Understand Section 194N of the Income Tax Act 1961, effective from 01/04/2023, governing TDS on cash withdrawals exceeding Rs. 3 crore by co-operative societies. Explore changes, rates, and Budget 2023 updates, including new sections impacting TDS on online gaming income, mutual funds, PF withdrawal, interest from listed debentures, transfer of virtual digital assets, and sale of immovable property. Stay informed on the latest tax deduction provisions for FY 2023-24 (AY 2024-25).
What is the Section 194N of the Income Tax Act 1961:-
Section 194N of the Income Tax Act 1961 is a provision that was introduced in the Finance Act, 2019. It provides for TDS (Tax Deduction at Source) on cash withdrawals from banks, post offices, and co-operative banks by certain persons. The section is applicable from 1st July 2020.
According to Section 194N, if an individual or HUF (Hindu Undivided Family) withdraws cash from their bank, post office or co-operative bank account, the bank is required to deduct TDS at the rate of 2% if the total cash withdrawal during the financial year exceeds Rs. 1 crore.
If a person withdraws cash from multiple accounts in the same bank, post office or co-operative bank, the limit of Rs. 1 crore will be applied to the total of all the accounts held by the person in that bank, post office or co-operative bank. The TDS deducted will be calculated on the amount that exceeds the threshold limit of Rs. 1 crore.
However, the provision of Section 194N does not apply to certain entities, such as the government, banks that are under the Banking Regulation Act, 1949, post offices, co-operative societies engaged in carrying on the business of banking, and any business correspondent of a banking company.
Changes in 194N Before the Budget of 2023:-
As of my knowledge I can provide you information on the changes introduced by the Finance Act, 2021, to Section 194N of the Income Tax Act, 1961.
The Finance Act, 2021, amended Section 194N to reduce the threshold limit for TDS on cash withdrawals from Rs. 1 crore to Rs. 20 lakh for persons who have not filed their income tax returns for the previous three assessment years and whose accounts are not linked with their Aadhaar. This provision is effective from 1st July 2021.
Further, the Finance Act, 2021, introduced a new provision under Section 206AB, which provides for higher TDS rates for certain non-filers of income tax returns. Under this provision, if a person has not filed their income tax returns for the previous two years and their aggregate TDS and TCS (Tax Collected at Source) exceeds Rs. 50,000 in each of these two years, then the TDS rate will be twice the applicable rate or 5%, whichever is higher. This provision is effective from 1st July 2021.
It is important to note that these provisions are subject to various conditions and exemptions, and taxpayers should consult with a tax professional for specific advice on their tax obligations.
194N-TDS Rate Chart for FY 2023-24 (AY 2024-25)
Budget 2023 TDS updates
Budget 2022 updates –