Tax Deducted At Source Provisions on Cash Transactions
Section 194N – TDS on cash withdrawal from banks/post offices
[Applicable from September 1, 2019]
Who is responsible to deduct tax u/s 194N?
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, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year, to any person (herein referred to as the recipient) from one or more accounts maintained by the recipient with it .
Who is the Payee?
TDS deduction on cash withdrawal u/s 194N is applicable to all taxpayers, including
A partnership firm or an LLP
A local authority
An Association of Person (AOPs) or Body of Individuals (BOIs)
Are there any exemptions to TDS on cash withdrawal u/s 194N?
No tax shall be deducted if amount is withdrawn from the bank or post office by following recipients:
Central or State Government
White label ATM operators
Other persons notified by the Govt. in consultation with the RBI
When to Deduct TDS under Section 194N?
At the time of payment of such sum
Rate & Threshold limit of TDS under Section 194N
(i) If an individual receiving the money has filed income tax return for any of the three years immediately preceding the year, then TDS to be deducted is an amount equal to two per cent of withdrawal sum exceeding one crore rupees
(ii) If an individual receiving the money has not filed income tax return for all the three years immediately preceding the year, then the TDS is 2% on the cash payments/withdrawals of more than Rs 20 lakh and up to Rs 1 crore, and 5% for withdrawal exceeding Rs 1 crore. (Amendment w.e.f 01.07.2020)
Is this section applicable to Non-resident?
The section applies to cash withdrawals made by resident as well as Non-resident. Therefore, if a NRI withdraws an amount of ₹ 150 lakhs on 15.02.2020 from his NRE Account maintained in India, the bank shall deduct TDS of ₹1,00,000.
Applicability of section when amount is withdrawn from different branches of same bank?
The limit of Rs 1 crore has to be seen for cash withdrawals made from all branches of a bank.
ABC LTD has withdrawn cash from following branches of Bank of India during the financial year on –
In this case the bank shall deduct TDS on 01.10.2019 at the rate of 2% on ₹50,00,000/- (1.50 crores –1 crore) i.e.₹1,00,000/- from the payment of ₹80,00,000/-.
Similarly bank shall deduct TDS on 01.12.2019 at the rate of 2% on ₹90,00,000/- i.e.₹1,80,000/- from the payment of ₹90,00,000/-.
Applicability of section when amount is withdrawn from different banks?
The cash withdrawals from two different banks shall not be aggregated for the limit of ₹ 1 Crore.