Clarification in relation to notification issued under clause (v) of proviso to section 194N of the Income-tax Act, 1961 (the Act) prior to its amendment by Finance Act, 2020 (FA, 2020)

Last updated: 21 July 2020

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This notification clarifies the validity of previous exemptions granted under Section 194N of the Income-tax Act, 1961, concerning cash withdrawals exceeding Rs. 1 crore. Specifically, it confirms that three earlier notifications issued in 2019, which exempted Cash Replenishment Agencies, APMC agents, and money changers under certain conditions, are still considered valid. These exemptions now fall under the amended provisions of Section 194N following the Finance Act, 2020, but remain subject to the original conditions specified in each notification.

Circular No. 14/2020 F. No. 370142/27/2020-TPL Government ofIndia Ministry of Finance Department of Revenue Central Board of Direct Taxes (TPL Division) Room no. 147B-II, North Block, New Delhi, dated 20th July, 2020 SUbject: Clarification in relation to notification

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FAQ :

Section 194N of the Income-tax Act requires banks, cooperative societies, and post offices to deduct tax at source (TDS) on cash payments exceeding Rs. 1 crore in aggregate during a financial year to a recipient.

The proviso to Section 194N empowered the Central Government, in consultation with the RBI, to exempt certain persons or classes of persons from the TDS provisions under this section through official gazette notifications.

Previously exempted entities included Cash Replenishment Agencies (CRAs) and franchise agents of White Label Automated Teller Machine Operators (WLATMOs), commission agents or traders under APMC, and authorised dealers/money changers licensed by the RBI for specific transactions.

Yes, Section 194N was amended by the Finance Act, 2020, to make its provisions more stringent for non-ITR filers. The clause that allowed for exemptions prior to the amendment is now the fourth proviso.

Yes, the notification clarifies that the three previous exemption notifications issued in 2019 shall be deemed to have been issued under the amended Section 194N and remain valid.

Yes, the exemptions allowed under the previously issued notifications are still subject to the specific conditions laid down in those respective notifications.