TDS Section 194N: TDS on Cash Withdrawals above Rs. 20 lakhs



Quick Summary
Section 194N of the Income Tax Act was introduced to encourage a less-cash economy by imposing TDS on significant cash withdrawals. Initially, it applied to withdrawals exceeding Rs 1 crore. However, an amendment effective from July 1, 2020, introduced stricter TDS rates for individuals who haven't filed their income tax returns for the three preceding assessment years.

In order to discourage cash transactions and move towards less cash economy, Section 194N was inserted vide Finance Act, 2019 (No.2). Following table shows the summarised details of the said section

TDS on Cash Withdrawals: Section 194N Explained

Section

194N

W.e.f

01-09-2019

Deductor

a) Any Banking company
b) A co-operative Bank
c) A post office,

Deductee

Any person except following

a) Any government body
b) Any bank including co-operative banks
c) Any business correspondent of a banking company (incl. co-operative banks)
d) Any white label ATM operator of any bank (incl. co-operative banks)
e) Any other person notified by the government

Transaction

Cash Withdrawals

Threshold

Rs. 1 crore (TDS will be deducted on the amounts withdrawn in excess of Rs. 1 crore)

Rate

2%

Time of deduction

At the time of withdrawal

New Update

The Finance Act 2020 has extended the scope of the section to include persons who have not filed their Income tax returns for immediate preceding 3 Assessment Years.

With effect from 01-07-2020, if the recipient(deductee) has not filed ITR for all the 3 immediate preceding Assessment Years following will be rates of TDS u/s 194N for such person:

Withdrawal Amount

Rate

0 to Rs. 20 lakhs

0%

Rs. 20 Lakhs to Rs. 1 Crore

2%

Above Rs. 1 Crore

5%

 
 

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About the Author

Chartered Accountant

Qualified Chartered Accountant.Engaged in renderingConsultancy,Advisory and compliance services on Income Tax and related matters. Member of ICAI since May 2016.

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