Section 194N: TDS on heavy cash withdrawal from Banks / Post Offices

With the amendment in Finance Act, 2020 section 194N was amended by substituting 83A which imposes 2% TDS on withdrawal of sum exceeding Rs.1 crore. This section has come into effect from 1st July 2020.

Every person including –

(i) Individuals
(ii) HUF
(iii) Company
(iv) Partnership firms or LLP
(v) Local authorities
(vi) Any association of person(AOPS) or Body of Individuals(BOI)
(vii) Any other assesses

Withdraws cash in excess of Rs. 1 crore during a financial year attracts TDS under section 194N.

WHO IS RESPONSIBLE TO DEDUCT TDS UNDER THIS SECTION?

The person (payer) who is making the cash payment of an aggregate of 1 core is responsible for deducting TDS under this section. This includes-

(i) Any bank covered under Banking Regulation Act, 1949
(ii) A co-operative society carrying on the business of banking
(iii) A post office

EXEMPTED PERSONS UNDER SECTION 194N OF THE ACT

No tax will be deducted if the amount is withdrawn from the following recipients-

(i) By central or state government
(ii) Banks
(iii) Co-operative societies
(iv) Post office
(v) Banking correspondents
(vi) White label ATM operators
(vii) Any other person notified by the central government in consultation with RBI

RATE OF TDS

The payer will deduct TDS at the rate of 2% on case withdrawal on the amount in the excess of Rs. 1 crore. For example. if a person withdraws Rs. 1,00,50,000 then TDS will be charged @2% at Rs. 50000 i.e., 1000.

In case the person has failed to file the ITR for immediately 3 preceding financial year, the
limit of tax deduction is 20 lakh

i) @2% on the amounts withdrawn from 20 lacs to Rs. 1 cr. And
ii) @ 5% in excess of withdrawal of Rs. 1 crore.

Authored by  Adv Shivam Kumar