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TDS on Cash Withdrawal – Amendment in Section 194N

1. The Finance Bill 2020 ( Bill) introduced vide Union Budget 2020-21 has been passed by both Houses of Parliament, with few amendments on 27th March 2020 and also received President’s assent .

2. One of the amendments which will effect a large number of people is change in scope of TDS on cash withdrawal under sec 194N of Income Tax Act 1961.

3. Clause 84 of Finance Act 2020 relates to section 194N of the Income-tax Act, the said section shall be substituted with effect from 1st day of July, 2020

4. Who are liable to deduct?

Bank, Co-operative bank or Post Office

5. Threshold limit

If aggregate payment in cash from one or more accounts during a previous year to an account holder exceeds the threshold limit given below on or after 01.07.2020

I. Customer who have not filed their tax returns for the previous 3 years and for which the due date for filing tax return has expired:

a. exceeding Rs. 20 lakh but not exceeding Rs. 1 crore:-TDS Rate-2%

b. exceeding Rs. 1 crore:- Rate-5%

II. Customers other than mentioned above:

a. up to Rs. 1 crore:- 0%

b. Exceeding Rs. 1 crore:-. 2%

6. The applicability of new provisions as per amendments in the Finance Act 2020.

I. The cash withdrawal limit will be effective from 01.04.2020

II. Tax is deductible at the time of payment of cash

7. Non applicability - Section 194N will not be attracted if withdrawal has been made by following:-

I. Government Body

II. Bank including co-operative banks

III. Business correspondent of banking company

IV. White label ATM operator of any bank

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