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



Quick Summary
Section 194N of the Finance Act 2020 mandates a 2% Tax Deducted at Source (TDS) on cash withdrawals exceeding ₹1 crore in a financial year. This applies to various entities, including individuals, companies, and firms, when withdrawing cash from banks, co-operative societies, or post offices. Certain entities like government bodies and banks are exempt from this TDS deduction.

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.

TDS on Cash Withdrawals Over ₹1 Crore: Section 194N Explained

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No tax will be deducted if the amount is withdrawn from the following recipients-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i) @2% on the amounts withdrawn from 20 lacs to Rs. 1 cr.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


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Taxblock is One stop solution to ITR, GST, U.S Tax, NRI, EXPAT, TDS, Tax Planning and many more for Individual & Business

Taxblock India Private Limited, founded in 2019, is a fintech startup located in Pune, Maharashtra. We are enrolled as an E-Return Intermediary with Income Tax Department have established an In-House team of Technology Tax Experts to build a Financial Compliance Ecosystem for Individual Corporates. Our clients cho ... Read more

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