TDS APPLICABILITY ON CASH WITHDRAWAL
(The author is an articled assistant at SSRPN & Co., she can be approached at cassrpn@gmail.com)
Section 194N, TDS applicability on cash withdrawals has been implemented with the purpose to discourage cash transactions and to promote digital economy.
The Union budget 2019 has introduced Section 194N for tax deduction at source (TDS) on cash withdrawals exceeding Rs. 1 crore. The budget 2020 thereafter reduced the threshold limit for TDS to Rs. 20 Lakh for taxpayers who have not filed their Income tax returns for the past three years.
Applicability of Section 194N:
(1)Every banking company
(2) Cooperative bank; or
(3) Post office,
who is responsible for paying any amount in cash the aggregate of which is exceeding Rs. 1 crore during the previous year 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 2% of sum as TDS.
TDS shall be deducted at 2% of the amount exceeding Rs. 20 lacs during the previous year;
And
(a) an amount equal to 2% of the TDS where the amount or aggregate of amounts, being paid in cash exceeds Rs. 20 Lacs during the previous year but does not exceed Rs. 1 crore; or
(b) an amount equal to 5% of the sum where the aggregate payment in cash exceeds Rs. 1 crore during the previous year.
Non Applicability of Section 194N:
Section 194 shall not be applicable in case of cash payment made to
(a) Government;
(b) any banking company or operative Bank or post office
(c) any business correspondent of any banking company, or cooperative Bank.
(d) any white label automatic tailor machine operator of a banking company or corporate event.
Let us understand this with the help of an example!
The entire article has been summed up through this table:
| Withdrawal Amount
|
Income Tax Return filed for 3 Previous Years | Income Tax Return not filed for 3 Previous Years |
| Upto Rs 20 Lakhs
|
NIL | NIL |
| 20 Lakhs to 1 Crore
|
NIL | 2% |
| Above 1 Crore
|
2% | 5% |
Ayushi Raja
