Section 194N is now amended by Finance Act, 2020 by clause 83A,
effect from the 1st day of July, 2020
@ Ajay Kumar Gupta
In India demoralise cash transaction government took many steps. Amendments in section 194N is one of this.
Section 194N is now amended by Finance Act, 2020 by clause 83A of the Finance Bill, 2020 as passed by the Lok Sabha, will take effect from the 1st day of July, 2020.
Section 194N says any person who withdraw cash from one or more bank accounts including a co-operative bank and post-office would be liable for (TDS) at the rate of 2% on cash withdrawal from FY 2020-21. (will take effect from the 1st day of July, 2020.)
The salient features of section 194N are listed below-
- Two categories of persons;
It is provided that the threshold limit for the same is Rs. 1 crore in a year for the person filling his income tax returns on time but in case of a person who has not filed his income tax return for last three assessment years and the time limit to file the return of income u/s 139(1) is expired, then the threshold limit of Rs. 1 crore is reduced to Rs. 20 Lakh and rate of TDS shall be-
(a) 2 percent from Rs. 20 Lakh to Rs. 1 crore, and
(b) 5 percent above Rs. 1 crore.
- Cash Withdrawal Accounts: This section shall apply in case of cash withdrawal from a bank account including a cooperative bank and from an account held with the Post Office.
- Bank-wise threshold limit: The limit of Rs. 1 crore shall apply bank-wise and not branch-wise. This is possible now due to core banking solutions implemented by banks.
- Aggregate from all accounts: It shall apply if the aggregate amount of cash withdrawal in a financial year exceeds Rs. 1 crore from one or more bank accounts. In other words, the aggregate of cash withdrawal from the savings account, current account, cash credit account, overdraft account, etc. of the same person shall be aggregated to determine the threshold limit of Rs. 1 crore or Rs. 20 lakh, as the case may be.
- TDS shall apply on excess cash withdrawal: If the cash withdrawal amount in a year exceeds Rs. 1 crore or Rs. 20 Lakh then TDS will apply on the excess amount of cash withdrawal over Rs. 1 crore or Rs. 20 Lakh, as the case may be, and not on the entire amount of cash withdrawal.
- Exclusions: It is applicable to all the account holders be it individual, HUF, company, etc. except government, banks, white label ATM operators, etc. who withdraws cash in excess of Rs. 1 crore in a year even if they file return of income or not.
- The rate of TDS for cash withdrawal is 2% and 5 per cent in certain non-filers cases.
- The purpose of cash withdrawal, whether for business or personal, is irrelevant.
When tax shall not be required to be deducted under section 194N?
No tax shall be required to be deducted if cash withdrawal is made by the following recipients:
- Banking company
- Co-operative Banks
- Any business correspondent of a bank authorised by RBI
- Any white label automated teller machine operator authorised issued by the RBI
- Any other person which central government may specify by the notification