Union budget 2019 had introduced a new section 194N – TDS on cash withdrawal. After that certain amendments have come under section 194N in budget 2020.
Section 194N of Income Tax Act 1961
Section 194N applies when a person (payee) withdraws cash more than Rs. 1 crore during a financial year from any of the following:
- Any Bank (whether public or private)
- Post office
- Co-operative bank
Then the Banks / Co-operative Bank / Post Office (payer) has to deduct TDS upon such withdrawal.
As section 194N two conditions apply for withdrawal of cash.
If a person has filed all ITR's
Limit: Rs. 1 Crore
Example:
If Mr. X withdrew more than 1 crore from a bank then the bank has to deduct TDS of the excess amount over Rs. 1 crore while making payment.
If a person has not filed ITR for the last 3 years
Limit: Rs. 20 lacs
Example:
If Mr. X withdraws Rs. 90 lacs and has not filed ITR for the last 3 years preceding the year of withdrawal then the bank will deduct TDS after crossing the limit for cash withdrawal i.e. 20 lacs.
TDS Rate under section 194N
|
Cash withdrawal Limit (in Rs.) |
Person filling all ITR’s |
Person not filing ITR of last 3 years preceding the year of withdrawal |
|
20 lacs up to 1 crore |
Not applicable |
TDS @2% |
|
More than 1 crore |
TDS @2% |
TDS @5% |
Applicability of section 194N
Section 194N is applicable on withdrawals made by the following:
- An Individual
- A Hindu Undivided Family
- A Company
- Partnership firm or Limited Liability Partnership
- An Association of person
- Body of Individuals
- A Local Authority
Non Applicability of section 194N
Section 194N is not applicable on withdrawals made by the following:
- Government body
- Bank (including Co-operative bank)
- White label ATM operator of any bank including a co-operative bank
- Business correspondent of banking company including a co-operative bank
- Any other person notified by the government
Important Points
- The Limit of Rs. 1 crore / Rs. 20 lacs as the case may be calculated with respect to each bank/ post office / co-operative bank separately.
- Example: If Mr. X has two accounts in two different banks and he has filed all ITR’s then he can withdraw Rs. 1 crore * 2= Rs. 2 crores (i.e. 1 crore from each bank)
- Different facilities with the same bank (i.e. saving account, current account, etc.) should be aggregated while calculating the limit.
- TDS to be deducted over the excess amount of limit during a financial year.
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