Click on the link [ Ссылка ] to know more about TDS on cash withdrawals above Rs 1 Crore.

Section 194N is applicable if you make cash withdrawals above Rs 1 crore in a financial year. The Section applies to the aggregate amount withdrawn by a particular payer during the financial year.

The Section applies to withdrawals made by taxpayers including:

Individuals
Hindu Undivided Family
Limited Liability Partnerships
Companies
Association of Persons
Local authorities

The following payers are covered under the Section:

Private and public sector banks
Co-operative banks
Post offices

The payer will have to deduct the tax before making payments to any individual in cash, from a taxpayers’ bank account on an amount above Rs 1 crore. The Rs 1 crore limit in a financial year is with respect to a bank or a post office and not the taxpayer’s individual account.

If a bank makes a cash payment of more than Rs 1 Crore in a financial year to an account holder from an account maintained by the taxpayer, then the bank will deduct TDS. The limit of Rs 1 crore is applicable to the cash withdrawals or payments made during the Financial Year 2019-20. The provisions of Section 194N will be applied to the payments made on or after 1 September 2019.

Why was Section 194N introduced?

The Government introduced Section 194N in the Union Budget 2019 to discourage cash transactions in India and promote the digital economy.

Who deducts TDS under Section 194N?

The payer making the cash payment deducts TDS under Section 194N. The list of such persons include:

Any bank i.e. Public, Private or Co-operative Bank
Post office

The provisions of the Section do not apply to certain categories of Payees:

Any government body
Post Office
A business correspondent of a banking company
White label ATM operator of a bank
Any bank including co-operative banks
Any person notified by the government

What is the purpose of TDS under Section 194N?

If the payee withdraws a sum of money at regular intervals, the payer will have to deduct TDS from the amount, only once the total sum withdrawn exceeds Rs 1 crore in a financial year.

For example, if a person withdraws Rs 99 lakh in the aggregate in the financial year and in the next withdrawal, an amount of Rs 1,50,000 is withdrawn, the TDS liability is only on the excess amount of Rs 50,000.

Rate of TDS under Section 194N

The payer deducts TDS at the rate of 2% on the cash payments or withdrawals of more than Rs 1 crore in a financial year under Section 194N.

If the person who receives the money has not filed income tax return for three years immediately preceding the year which he receives the payment, then the TDS is 2% on the cash payments or withdrawals greater than Rs 20 lakh and up to Rs 1 crore, and 5% for withdrawals exceeding Rs 1 crore.

свернуть