TDS on Cash withdrawal from Bank | Tax on Bank cash withdrawal | How to file ITR for TDS refund
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About video
Section 194N of the Income Tax Act is a provision that deals with Tax Deduction at Source (TDS) on cash withdrawals. It was introduced to discourage cash transactions and promote digital payments. Here's an explanation of Section 194N
Section 194N applies to individuals and Hindu Undivided Families (HUFs).
It mandates the deduction of TDS by banks or co-operative societies on cash withdrawals exceeding a specified threshold.
The threshold limit for TDS under Section 194N was initially set at Rs. 1 crore per financial year.
However, in the Union Budget 2020, it was amended, and the threshold was reduced to Rs. 20 lakh for certain cases.
If the cash withdrawal exceeds the threshold limit within a financial year, TDS at the rate of 2% is applicable.
The TDS deduction is made at the time of withdrawal itself by the bank or co-operative society.
The responsibility of deducting and depositing TDS lies with the bank or co-operative society and not the account holder.
The TDS deducted under Section 194N is linked to the account holder's PAN.
If the account holder does not provide a PAN, the TDS rate increases to 20%.
The objective of Section 194N is to promote digital transactions and discourage the use of cash for high-value withdrawals.
The provision helps in curbing the circulation of black money and promotes a more transparent financial system.
Section 194N ensures that individuals are accountable for their cash transactions and discourages hoarding of cash.
The TDS deducted under Section 194N can be adjusted against the individual's final tax liability while filing the income tax return.
The TDS deducted is reflected in the individual's Form 26AS, which is an annual tax statement.
If the individual's income is below the taxable limit, they can claim a refund of the TDS deducted while filing the return.
Section 194N does not apply to certain categories of individuals, such as the government, banking companies, cooperative banks, etc.
The provision encourages individuals to adopt digital payment methods and promotes a cashless economy.
It aligns with the government's initiatives to reduce the dependency on cash transactions and promote transparency.
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