Sponsored
    Follow Us:
Sponsored

TDS on Cash Withdraw Understand TDS on Cash Withdrawals with insights on applicability, rates, and exemptions. Section 194N mandates a 2% TDS on cash withdrawals exceeding ₹1 crore. Learn about the time and conditions for deduction, plus scenarios exempt from TDS. Author CA. Atif provides a detailed example for clarity.

♦ Applicability and rate of TDS

Section 194N provides that every person, being

1. a banking company

2. a co-operative society engaged in carrying on the business of banking or

3. a post office

who is responsible for paying any sum, being the amount or aggregate of amounts, as the case may be, in cash exceeding 1 crore during the previous year, to any person from one or more accounts maintained by such recipient-person with it, shall deduct tax at source @2% of such sum as income tax.

For Co-operative Society limit has increased to Rs 3 Crore.

♦ Time of deduction

This deduction is to be made at the time of payment of such sum.

♦ Rate of TDS

  • TDS will be deducted at a rate of 2% on cash withdrawals in excess of ₹ 1 crore if the person withdrawing the cash has filed income tax return for any or all three previous Assessment Years
  • TDS will be deducted at 2% on cash withdrawals of more than ₹ 20 lakh and 5% for withdrawals exceeding ₹ 1 crore if the person withdrawing the cash has not filed ITR for any of the preceding three Assessment Years.

However, the Central Government is empowered to specify, with the consultation of RBI, by notification, the recipient in whose case this provision shall not apply or apply at reduced rate, subject to the satisfaction of the conditions specified in such notification.

No TDS if payment is made to:

  • Government,
  • Banking Co. or Co – Operative Society engaged in carrying banking business or Post Office,
  • Any business correspondent of Banking Company or Co-Operative Society in accordance with RBI Guidelines
  • Any white label ATM operator of Banking Company or Co – Operative Society.

To elaborate these provisions let us take an example

Mr A withdraws the following sums in cash during the year

Date Amount Withdrawn
01st August 10,00,000
15th September 35,00,000
17th November 25,00,000
28th January 45,00,000
16th March 30,00,000

He has not furnished his return of income for last three previous years. Let us check implication of TDS u/s 194N in this case.

Answer- Since Mr A has not filed return of income for last three previous years accordingly tax shall be deducted as follows:

Date Amount Withdrawn Aggregate of amount withdrawn Tax Deducted at Source
Rate Computation Tax to be Deducted
01st August 10 Lakhs 10 Lakhs
15th September 35 Lakhs 45 Lakhs 2% 45 Lakhs 90,000
17th November 25 Lakhs 70 Lakhs 2% 25 Lakhs X 2% 50,000
28th January 45 Lakhs 115 Lakhs 2% and 5% (30 lakhs X 2%) + (15 Lakh X 5%) 1,35,000
16th March 30 Lakhs 145 Lakhs 5% 30 Lakhs X 5% 1,50,000

If Mr A had furnished his income tax return of any of previous years from last three previous years then TDS would have been deducted on cash withdrawals on 28th January @ 2% i.e. Rs. 2,30,000 (115 Lakhs X 2%) and on 16th March @ 2% i.e. Rs. 60,000 (30 Lakhs X 2%).

(The author is practicing chartered accountant and can be reached out at  [email protected], Mobile- 9811270863)

Sponsored

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Sponsored
Sponsored
Sponsored
Search Post by Date
October 2024
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
28293031