TDS on Cash Withdrawal w.e.f. 1 July 2020: Things to know
Section 194N for TDS on cash withdrawals was introduced in Union Budget 2019 with the objective to discourage cash transactions in the country. With effect from 1st July 2020, this section has been amended vide clause 84 of the Finance Act 2020. This is with respect to Tax Deducted at Source [TDS] against cash withdrawals.
The changes applicable with effect from July 1, 2020, are stated as below:
1. If Income Tax Returns are not filed for the preceding 3 financial years, for which the time limit for filing returns under section 139(1) has expired, then rates of TDS under section 194N of the Income Tax Act, 1961 would be as under:
• TDS at 2% on aggregate cash withdrawal exceeding INR 20 Lakh to INR 1 Crore, and
• TDS at 5% on aggregate cash withdrawal exceeding INR 1 Crore
2. For tax returns that have been filed for the previous 3 years, TDS will continue to apply at 2% on cash withdrawn exceeding INR 1 Crore. However, in the absence of a valid Permanent Account Number [PAN] issued by the Income Tax Department, the applicable TDS rate will be at 20% for aggregate cash withdrawal of more than INR 20 lakhs.
3. Cash withdrawals from 1 April 2020 onwards, would be considered for calculating the cumulative cash withdrawal for the purpose of TDS.
4. Below is the list of persons/ entities who are exempted from TDS on cash withdrawal:
• Banking company or a co-operative society engaged in carrying on the business of banking or a post office;
• Business correspondent of a banking company or co-operative society engaged in carrying on the business of banking;
• Any white label automated teller machine operator of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the authorization issued by the Reserve Bank of India;
• Such other person(s) as may be specified by the Central Government