How to verify whether the customer is filing income tax returnor not – New facility for its verification of TDS Rate on cash withdrawal U/s 194N

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How to verify whether the customer is filing income tax return or not – New facility for its verification of TDS Rate on cash withdrawal  U/s 194N

In order to further discourage cash transactions and move towards less cash economy, new section 194N is introduced in the Income Tax Act which provides for levy of TDS at the rate of two per cent on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from an account maintained by the recipient. However, if the customer has not filed the returns of income for all of the three assessment years relevant to the three previous years, for which the time limit of file return of income under sub-section (1) of section 139 has expired, immediately preceding the previous year in which the payment of the sum is made to him, then the TDS rate would be as under: 5%

(a) an amount equal to 2% of the sum where the amount or aggregate of amounts, as the case may be, being paid in cash exceeds twenty lakh rupees during the previous year but does not exceed one crore rupees; or

(b) an amount equal to 5% of the sum where the amount or aggregate of amounts, as the case may be, being paid in cash exceeds one crore rupees during the previous year:

In short,

  1. As per the new section 194N, a banking company or a co-op. bank or a post office which is responsible for paying any sum, being the amount or the aggregate of amounts, in cash exceeding Rs. 1 crore during the previous year, to any person from one or more account, shall at time of payment of such sum, deduct 2% of such sum as income-tax.
  2. A proviso has been inserted to Section 194N to reduce the threshold limit for deduction of tax from Rs. 1 crore to Rs. 20 lakh if the person has not filed return of income for all the 3 preceding years. TDS rate shall be 2% from the amount withdrawn in cash if the aggregate of the amount of cash withdrawal exceeds Rs. 20 lakhs during the previous year but does not exceed one crore rupees; or (b) 5% from the amount withdrawn in cash if the aggregate of the amount of cash withdrawal exceeds Rs. 1 crore during the previous year.

Now, the question arises, how to verify whether the person is filing income tax return or not?  If filing then whether the returns are filed for the last 3 years or not? Further, the conditions of 3 years need to be verified on each and every occasion of payment.

To ensure the ease in compliance with the TDS u/s 194N, the income tax portal has incorporated a feature to let the taxpayers know whether the TDS is applicable @ 2% or 5%. A new faiclity has been added in the portal at www.incometaxindiaefiling.gov.in . It is as under:

View quick links portion on the left hand side of the portal at

https://www.incometaxindiaefiling.gov.in/home

The above screen shows the option for “verification of applicability U/s 194N”

After clicking the verification options, the portal asked for the PAN of the customers for which the bank want to check the applicability of the TDS rate. The following link will be there:

https://www1.incometaxindiaefiling.gov.in/e-FilingGS/Services/ViewReturnStatusLink.html?lang=eng

It means that payer i.e., bank will be required to put the PAN of its customers.  Thereafter, the bank will be required to put their own mobile number on which an OTP will be send for the confirmation and keep a track of the person verifying it.  The person checking it must put his mobile number and then submit it. After its submission, the OTP will be send on that mobile number.

After this, a message will be displayed at the site about the rate of applicability of TDS. It could be either 2% or 5%.

TDS APPLICABILITY AT 2%

TDS APPLICABILITY AT 5%

With this, the payer will not be required to obtain the income tax return of the customers and can just check it at the income tax portal as mentioned above.

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