Sec 194N:  Tds on cash withdrawal of more than 1 crore

Intro: To discourage the cash transaction and move to cash less economy, income tax department has introduced a new section 194N deduction of TDS on cash withdrawal exceeding  Rs. 20 Lakh In case the individual receiving the money has not filed income tax returns for 3 years immediately preceding the year and Rs. 1 crore in other cases.
Earlier threshold limit was Rs. 1 crore but Union Budget 2020 has reduced the same to Rs. 20 Lakh.
 
Applicability :

Section 194N is made applicable from 1-09-2019. Section 194N provides that the tax shall be required to be deducted only when the aggregate amount of cash withdrawn by a person during the previous year, from one or more of his bank or post office account, exceeds Rs. 1 Crore. Hence, for the purpose of computation of threshold limit of Rs. 1 crore, the total amount of cash withdrawn during the previous year shall be considered. However CBDT has issued a press release dated 30-08-19, any withdrawal made  prior to 1st September 19 doesn’t comes under this purview. For calculation of 1 crore limit the withdrawal made before Sep 1 is also to be considered. 

For Eg : If a person X withdraws 1 crore before 30-8-19, then 2% TDS will be deducted thereafter on all the amounts.

Who is liable to deduct TDS:

1) Every Banking Company
2) Co- operative bank
3) Post office
to deduct tax on cash withdrawal made by any person from account(s) maintained with such bank or post office.

What is the Rate of TDS :

The tax shall be deducted at the rate of 2% on the amount of cash withdrawal exceeding Rs. 1 crore. In case the individual receiving the money has not filed income tax returns for 3 years immediately preceding the year, then the TDS is 2% on the cash payments/ withdrawals of more than 20 lakhs and up-to 1 core, and 5 % for withdrawal exceeding Rs 1 crore.
When tax shall not be required to be deducted

No tax shall be required to be deducted if cash withdrawal from bank or post office is made by the following recipients:

1. Central or State Government

2. Banks

3. Co-op. Banks

4. Post Office

5. Banking correspondents

6. White label ATM operators

7. Other persons notified by the Govt. in consultation with the RBI.

Note:

1) The section specifically mentioned one or more accounts maintained in a banking company. It means if a person maintains a savings and current account, the threshold limit for calculating 1 crore/20Lakh (As Applicable) should be of aggregating amounts withdrawn in both accounts cumulatively.

2) If a person maintains current and savings accounts in different banks then he can withdraw  2*1 crore  = 2 crores without TDS.

Author Bio

Qualification: CA in Practice
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Location: Chennai, Tamil Nadu, IN
Member Since: 29 Jul 2020 | Total Posts: 3

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8 Comments

  1. SUNIL CHOWDHARY says:

    Sir,

    I have filed the IT return of FY 18-19, 17-18, and 16-17, this years IT return is yet to be filed as the due date has not yet reached but still my bank has started deducting TDS on My withdrawals as they have Exceeded 20 Lakhs. How to get it stopped as the bank persons seems to have no clue about it.

    Thanks in advance

    1. CA Chandra Sekhar says:

      Dear Chaitanya
      As I already mentioned in article, 3 years IT returns to be filed for getting exemption upto 1 crore. For FY 19-20 immediately preceding three years IT returns to be filed i.e., FY 16-17, 17-18 and FY 18-19.

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