Q1. Why TDS on Cash Withdrawal?
A: To discourage cash transaction and promote Digital Economy.
Q2. To Whom this section is applicable?
A: Any taxpayer including;
- 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)
Q3. TDS shall be deducted by Whom?
A: Person making payment as below;
- Any bank (private or public sector)
- A co-operative bank
- A post office
Q4. Is there any Ceiling Limit for Tax Deduction?
A: Yes. Upto 1 Crore per bank account per annum but threshold increase to ₹3 crores for co-operative societies in Budget 2023
Ex: If a person has 3 bank accounts in different banks, he can withdraw the amount upto Rs. 3 Crores [Rs. 1 Crore x 3 Banks] with no TDS deduction.
Q5. At what rate TDS shall be deducted?
A: 2% for more than Rs 20 lakh and up to Rs 1 crore and 5% for withdrawals exceeding Rs 1 crore.
Ex: If a person has withdrawn Rs. 99 Lakhs previously and now he is withdrawing another Rs. 1.5 lakh, then TDS shall be made only to Rs. 50,000.00 at 2% i.e., Rs. 1000.00 shall be the TDS amount.
Q6. From when Section 194N is applicable?
A: The provisions of Section 194N will be applied to the payments made on or after 1st September 2019.
Q7. Will the amount withdrawn before 1st September be considered in Section 194N?
A: The limit of Rs 1 crore will be applicable to the cash withdrawals made during the FY 2019-20. Hence the amount withdrawn previously shall be considered to calculate Rs. 1 Crore but TDS shall be deducted henceforth and not retrospectively.
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