1. What is Section 194N?
Section 194N is applicable in case of cash withdrawals of more than Rs 1 crore during a financial year.
The tax will be deducted by the payer(Any Bank, post office, etc) while making payment to any individual in cash from a bank account on the amount in excess of Rs 1 crore.
The limit of Rs 1 crore in a financial year is with respect to per bank or post office. For example, a person having five bank accounts with five different banks, he can withdraw cash of Rs 1 crore * 5 = Rs 5 crores without any TDS.
2. Why Section 194N?
This section was introduced in the Union Budget on 5 July 2019. To discourage cash transactions in India and also to promote the digitalization in Country.
3. Applicability of Section 194N:-
Withdrawals made by any taxpayer
Any bank (private or public sector)
A co-operative bank
A post office
· An Individual
· A Hindu Undivided Family (HUF)
· A Company
· A partnership firm or an LLP
· A local authority
· An Association of Person (AOPs) or Body of Individuals (BOIs)
4. Non-applicability of Section 194N:-
- Any government body
- Any bank including co-operative banks
- Any business correspondent of a banking company (including co-operative banks)
- Any white label ATM operator of any bank (including co-operative banks)
- Any other person notified by the government
5. When and on what point TDS will deduct under Section 194N?
TDS will be deducted by the Bank/Post-office while making the cash payment over and above Rs 1 crore. If the payee withdraws a sum of money on regular intervals, the payer will have to deduct TDS from the amount, once the total sum withdrawn exceeds Rs 1 crore in a financial year.
6. Rate of TDS on Cash Withdrawal
The payer will have to deduct TDS at the rate of 2% on the cash payments/withdrawals of more than Rs 1 crore in a financial year under Section 194N.
In case the individual receiving the money has not filed an income tax return for three years immediately preceding the year, then the TDS is 2% on the cash payments/withdrawals of more than Rs 20 lakh and up to Rs 1 crore, and 5% for withdrawal exceeding Rs 1 crore.
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