In Finance Act, 2020 Government came with section  194N ‘Payment of certain amounts in cash’, Applicable from 01st July, 2020, which states that :

Every person, being,—

 (i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

(ii) a co-operative society engaged in carrying on the business of banking; or

(iii) a post office,

who is responsible for paying any sum, being the amount or the aggregate of amounts, as the case may be, in cash exceeding one crore rupees ( 1 Crore) during the previous year, to any person (herein referred to as the recipient) from one or more accounts maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to two per cent of such sum, as income-tax:

Proviso has been given u/s 194N which talks about certain condition( i.e. relating to filing of ITR before due date )  for threshold limit to deduct  TDS u/s 194N is summarized in below table :

Condition Total Cash Withdrawal Rate
If returns of income for all last three financial years  have NOT BEEN FILED for which the time limit of file return of income under sub-section (1) of section 139 has expired Upto Rs. 20,00,000 Nil
Rs. 20,00,001 to 1,00,00,000 2%
Rs. 1,00,00,001 and above 5%
If returns of income for all last three financial years have BEEN FILED for which the time limit of file return of income under sub-section (1) of section 139 has expired Upto Rs. 1,00,00,000 Nil

It may please be noted that in case the customer does not furnish PAN, rate of TDS shall be increased to 20% as per the general provision.

Moreover, limit of cash withdrawal shall be construed with reference to all the accounts of the same customer across the bank.

Nothing contained above shall apply to payment made to :

1. Government

2. any banking company or co-operative society

3. any business correspondent of a banking company or co-operative society.

4. any white label automated teller machine ( ATM ) operator of a banking company or co-operative society.

Thank you.

This article is based on understanding of an author. it would not be considered as proof before any authority / person.

Author Bio

Qualification: Student - CA/CS/CMA
Company: N/A
Location: Ahmedabad, Gujarat, India
Member Since: 11 Mar 2021 | Total Posts: 1

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One Comment

  1. GANDHI MOHAN BHARATI says:

    The logic of 20% TDS by the Bank or co-operative society engaged in carrying on the business of banking or Post office, if the customer has not provided PAN, is a short sighted thinking because you have already mandated that all accounts need PAN. So it is a routine clerical drafting. Poor Governance by Government

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