SEC-194N- TDS ON CASH WITHDRAWAL (inserted w.e.f. 01.09.2019)

Section 194N provides that any person being (Payer) 
(i) a banking company 

(ii) a cooperative society carrying on business of banking

(iii) a post office

who is responsible to pay, in cash, any sum or aggregate of sums exceeding 1 crore rupees during the previous year, to any person (recipient) from one or more accounts maintained by the recipient, shall deduct TDS @ 2% of sum exceeding Rs. 1 Crore. 

The section will apply to withdrawals made by any taxpayer including: (Recipient)

(a) An Individual

(b) A Hindu Undivided Family (HUF)

(c) A Company

(d) A partnership firm or an LLP

(e) A local authority

(f) An Association of Person (AOPs) or Body of Individuals (BOIs)

Time of Deduction

Deduction to be made at the time of payment of such sum.

Non applicability of Sec 194N

Deduction of TDS will not be applicable if payment made to the following persons: (Recipient)

(i) Any government body

(ii) Any bank including co-operative banks

(iii) Any business correspondent of a banking company (including co-operative banks)

(iv) Any white label ATM operator of any bank (including co-operative banks)

(v) Any other person notified by the government

Person to whom credit is given for tax deducted and paid

For the purpose of SEc 194N, credit is to be given to the person from whose account tax has been deducted and paid to the CG for the relevant previous year in which such deduction is made.

Clarification as to the applicability of section 194N and manner of computing the threshold limit of Rs.1 crore thereunder, where cash withdrawals have taken place prior to 01.09.2019 (Press release 31.08.2019)
Since the threshold of Rs. 1 crore is with respect to the previous year 2019-20, calculation of amount of cash withdrawal for triggering deduction under Section 194N shall be counted from 1st April, 2019 

There are two options :

(i) Cash withdrawal before 01.09.2019 < Rs. 1 Crore – Then TDS @ 2% will be deducted when the aggregate withdrawal amount crosses Rs. 1 Crore. 

(ii) Cash Withdrawal before 01.09.2019 > Rs 1 Crore – Then TDS @ 2% is to be deducted on amount paid after 01.09.2019 on all subsequent withdrawals.

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February 2021