Scope of Section 194N of the Income tax Act 1961, and recent amendments to it brought by Finance Act, 2020 and Press release
In the maiden Budget Speech, while presenting the Union Budget 2019, the Finance Minister Nirmala Sitaraman said that in a bid to promote digital payments and to discourage cash payments she proposed to levy TDS of 2% on cash withdrawal exceeding 1 crore in a year from a bank account, post office, cooperative bank.
The Scope of TDS on cash withdrawal has been extended. This amendment will be with effect from 01 July 2020.
Amended scope includes:
Every bank, post office and cooperative society shall deduct TDS:
a) 2% if the aggregate amount of cash withdrawals during the previous year exceeds INR 20 lakhs,
b) 5% if the aggregate amount of cash withdrawals during the previous year exceeds INR 1 crore.
Press Release DATED 12th JUNE 2020 states:
The Income Tax Department has facilitated a new functionality for Banks and Post offices
through which they can ascertain the TDS applicability rates on cash withdrawal. So far, more than 53,000 verification requests have been executed successfully on this facility.
CBDT in a Press release DATED 12th June 2020, said that this functionality available as “Verification of applicability u/s 194N” on www.incometaxindiaefiling.gov.in since 1 July 2020, is also made available to the Banks through web-services so that the entire process can be automated and be linked to the Bank’s internal core banking solution.
This automation facilitates easy compliance for Banks and post offices.
Threshold limits and Rates applicable by the amendment at glance:
|S.no||Recipient who has:||Threshold limit||Upto 30.06.2020||From 01.07.2020|
|1.||Filed the returns of income for all of the three assessment years relevant to the three previous years cash withdrawals exceeding 1 cr||1cr||2%||2%|
|2.||Not Filed the returns of income for all of the three assessment years relevant to the three previous years;||1 cr Limit upto 30.06.2020, but wef 01.07.2020 the limit has been lowered to 20 Lakhs|
|Cash withdrawals from 20 Lakhs to 1 cr||2%||2%|
|Cash withdrawals exceeding 1 cr||2%||5%|
TDS will be deducted by:
Every person, being
being the amount or the aggregate of amounts, as the case may be, in cash exceeding the specified amount 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 of certain % of such sum, as income tax.
Applicability of the section:
The section will apply to withdrawals made by following taxpayers:
Non Applicability of the section:
Sec 194N will not apply to withdrawals made by following taxpayers:-