Increasing threshold limit for co-operatives to withdraw cash without TDS

Section 194N – Threshold limit for co-operatives to withdraw cash without TDS increased to Rs. 3 crore from existing one crore with effect from 1st April, 2023

Section 194N of the Act provides that a banking company or a co-operative society engaged in carrying on the business of banking or a post office, which is responsible for paying any sum to any person (referred to as the recipient) shall, at the time of payment of such sum in cash, deduct an amount equal to two per cent of such sum, as income-tax. The requirement to deduct tax applies only when the payment of amount or aggregate of amount in cash during the year exceeds one crore rupees.

2. However, in case of a recipient who is a non-filer tax is to be deducted at the rate of 2% on any sum exceeding Rs. 20 lakh but not exceeding Rs. 1 crore in aggregate during the financial year and, at the rate of 5% on sum exceeding Rs. 1 crore in aggregate during the financial year.

Threshold limit for co-operatives increased to Rs. 3 crore

3. Non-filer means a recipient who has not filed any income-tax return for all of the three assessment years relevant to the three previous years immediately preceding the previous year in which such payment is received.

4. It is proposed to amend section 194N of the Act by inserting a new proviso to provide that where the recipient is a co-operative society, the provisions of this section shall have effect, as if for the words “one crore rupees”, the words “three crore rupees” had been substituted.

6. This amendment will take effect from 1st April, 2023.

[clause 85]

Extract of relevant clause of Finance Bill 2023

Clause 85 of the Bill seeks to amend section 194N of the Income-tax Act relating to payment of certain amounts in cash.

The provisions of the said section provide that a banking company or a co-operative society engaged in carrying on the business of banking or a post office, which is responsible for paying any sum, being the amount or the aggregate of amounts, in excess of one crore rupees in cash during the previous year to any person (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.

It is proposed to insert a third proviso in the said section so as to provide that where the recipient is a co-operative society, the provisions of this section shall have effect, as if for the words “one crore rupees” the words “three crore rupees” had been substituted.

This amendment will take effect from 1st April, 2023.

Extract of Relevant Amendment Proposed by Finance Bill, 2023

85. Amendment of section 194N.

In section 194N of the Income-tax Act, after the second proviso, the following proviso shall be inserted, namely:–

“Provided also that where the recipient is a co-operative society, the provisions of this section shall have effect, as if for the words “one crore rupees”, the words “three crore rupees” had been substituted.”.

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Source : Finance Bill 2023 / Union Budget 2023

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