TDS on Cash Withdrawal 194N: Applicability and Scope
TDS ON CASH WITHDRAWAL 194N: To demolish the cash transaction system and to promote the digital economy The Finance Ministry of India in finance bill 2019 comes with new section of TDS which is TDS 194N for deduction of tax on cash withdrawal exceeding Rs 1 crore in financial year.
Applicability
The section is applicable to aggregate of sums withdrawn/payment by taxpayer including an individual, Hindu undivided family, a company, a partnership firm or an LLP, Local authority, an association of person or body of individuals, etc.
Apart from this Certain categories of person are excluded from the provision of this section –i:e government body, bank including co-operative banks and any other person notified by the government. This means 194N is applicable in all other cases including welfare trusts, charitable institution etc.
Note: The section is applicable to Non-resident also. If a NRI withdraws an amount more than 1 crore from Account maintained in india.
Liability to Deduct Tax
TDS on cash withdrawal is deducted by payer while making cash payment to its recipient (account holders) bank account if the amount is more than Rs 1 crore for financial year for each bank account. For example, if a person having more than one bank account i: e two then he can withdraw Rs 2 crore without deduction of any TDS.
The bank of taxpayer (account holder) is liable to deduct TDS from taxpayers (account holders) account if bank makes a cash payment of more than Rs 1 crore In a financial year to its account holder. In case where a person making payment through bearer cheque to third person where the third person is not a account holder then in this case bank is not a payer or making payment and whether bank is liable to deduct tds? There is an ambiguity on that.
Limit & Tax Rates
The limit of 1 crore will be applicable to cash withdrawal or cash payment from the FY 2019-20 after 1st September 2019 on amount exceeding Rs 1 crore and the rate of tds is 2% for taxpayer who filed income tax every year. In case where individual has not filed income tax return for last three years then the limit of tax deduction is 20 lakh for financial year and the rate of tax is 2% on cash withdrawal of 20 lakh to 1 crore and 5% for the amount exceeding 1 crore.
| DATE | AMOUNT OF WITHDRAWAL | AGGREGATE AMOUNT | RATE | COMPUTATION | TAX |
|---|---|---|---|---|---|
| 05/05/2020 | 10 LAKHS | 10 LAKHS | – | – | – |
| 25/08/2020 | 30 LAKHS | 40 LAKHS | 2% | (40 LAKH-20 LAKH ) x 2 | 40,000 |
| 15/09/2020 | 35 LAKHS | 75 LAKHS | 2% | 35 LAKH x 2% | 70,000 |
| 05/10/2020 | 35 LAKHS | 1.10 CRORE | 2% & 5% | (25 LAKHS x 2%) + (10 LAKH x 5%) | 1,00,000 |
| 31/10/2020 | 50 LAKHS | 1.6 CRORE | 5% | 50 LAKH x 5% | 2,50,000 |
Exemptions
The exemptions are provided to certain categories only which is mentioned above. Apart from this there is no such exemptions. Even the recipient of cash cannot furnish form no 15G/15H to the bank and cannot apply for lower deduction certificate u/s 197.
Exemptions and Exceptions to TDS on Cash Withdrawal
Here are some exemptions and exceptions to TDS (Tax Deducted at Source) on cash withdrawal under section 194N of the Income Tax Act:
- Exemptions for Certain Individuals:
- Senior Citizens: TDS on cash withdrawal under section 194N does not apply to individuals who are senior citizens (aged 60 years or above) during the previous year in which the cash withdrawal is made.
- Beneficiaries of Specified Payments: TDS on cash withdrawals is not applicable to withdrawals made by any person for meeting specified payments such as insurance premiums, purchase of mutual funds, purchase of goods and services, etc., as specified by the government.
- Exceptions for Certain Withdrawals:
- Withdrawals from Certain Accounts: TDS on cash withdrawal does not apply to withdrawals made from certain accounts such as:
- No-frills accounts or Jan Dhan accounts
- Basic Savings Bank Deposit Accounts (BSBDA)
- Accounts held by the Central Government, State Government, or any banking company, cooperative society engaged in the business of banking
- Withdrawals from Certain Accounts: TDS on cash withdrawal does not apply to withdrawals made from certain accounts such as:
- Exemptions based on Jurisdiction:
- Non-Resident Individuals: TDS on cash withdrawal does not apply to non-resident individuals or individuals who are not eligible to obtain a Permanent Account Number (PAN) in India.
It’s important to note that the exemptions and exceptions mentioned above are subject to certain conditions and limitations as specified by the income tax department. It is advisable to consult with a tax professional or refer to the official guidelines to understand the specific exemptions and exceptions applicable to your situation.