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TDS Applicability on Cash Withdrawals in India

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TDS Applicability on Cash Withdrawals in India

Earlier the Tax Deduction was applicable only at the time of payment made by the payer to the receiver. But after the announcement of the finance act 2019, Now TDS will also be applicable at the time of withdrawal of cash. TDS will be deducted by the Bank i.e. the payer. However, there is a threshold limit for withdrawal of cash up to which no TDS will be deducted from the payment of cash. The Provision of deduction of TDS from cash payment is included in section 194N which has been introduced by Finance Act 2019. The rate of Deduction of TDS under this section is 2 percent. Let’s discuss this section in more details:

Who will be the Payer?

  1. Banks
  2. Cooperative society engaged in the business of banking
  3. Post offices

 

Who will be the Receiver?

Any Person Except:

  1. Government (Whether Central or State)
  2. Banks
  3. Business Correspondents of a banking company
  4. ATM (White Label)

 

Cases Where TDS will not be deducted.

 

  1. Where Payment Does not exceed Rs. 20 Lakhs
  2. Where Payment is Between 20 Lakhs to 1 Crore, Provided the Return Income for All the 3 preceding Financial years have been filed by the Assessee.

Rates of TDS where Return of Income is not filed by Assessee for preceding 3 years.

  1. No TDS up to Rs. 20 lakhs Payment.
  2. TDS will be deducted @ 2% where Payment made is between Rs. 20 lakhs and Rs 1 Crore.
  3. TDS will be deducted @5% where Payment made is Above Rs. 1 Crore.

 

Other Points relevant for this Section

  1. White Label ATMs: ATMs that are set up and operated by persons who are non-Banks are known as White Label ATMs. These ATMs are authorized by the RBI to develop White-Label ATM.

 

Some FAQ’s on Section 194N

  1. I have filed the Last 2 years’ ITR and my withdrawals will be 18 Lakhs this year. TDS will be not be Deducted under section 194N, as the Payment during the financial year does not exceed 20 Lakhs. If the Payment would exceed Rs 20, 00,000 then TDS will be deducted @2% on the whole amount of cash withdrawals.

 

  1. Will Current Assessment Year ITR will be counted in the Last 3 years ITR for non-Deduction Of TDS?

No, only Preceding 3 years ITR will be counted for this section. Current Assessment years ITR will be counted from the Next Year. For Example for the financial year 2020-21, ITR for the preceding 3 years which are 2019-20, 2018-19, 2017-18 shall be taken into consideration for the availing of non-deduction of TDS.

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