Section 194-N
Budget 2020 had amended the scope of section 194-N of the Income-tax Act, 1961. The new law on TDS on cash withdrawal has come into effect from July 1, 2020. The scope of Section 194N has been substantially enhanced by the Finance Act, 2020. Earlier only single TDS rate and single threshold limit was prescribed for deducting tax on cash withdrawal. Now, a banking co., or a co-op. bank or a post office is required to deduct tax at two different rates considering two different threshold limits.
Rate of TDS
| Aggregate Cash withdrawal in a financial year | Rate of TDS if ITR of last 3 years filed | Rate of TDS if ITR of last 3 years not filed |
|---|---|---|
| Up to Rs 20 Lakhs | NIL | NIL |
| Rs 20 Lakhs – 1 Crore | NIL | 2% |
| In excess of Rs 1 Crore | 2% | 5% |
Important Points related to Cash withdrawal from Bank
- This limit is applicable to individual Bank (Private and Public Both), Co-op Bank and Post office. Ex: If you have account in two banks say PNB and SBI, then you can withdraw 20 Lakhs/ 1 Crores from each Bank. The limit presecribed in section is for each individual Bank, Co-op Bank and Post office.
- This section is applicable to all type of accounts including Saving / Current / Cash Credit / Overdraft.
- TDS shall be deducted on amount exceeding Rs 20 lakhs / 1 Crore only. Ex: If you have withdrawn 25 Lakhs, then TDS shall be deducted on Rs 5 Lakhs only, not on total 25 Lakhs. Similary, if a person has withdrawn more than 1 Crore, then TDS shall be deducted only on amount in excess of Rs 1 Crore.
- The amount deducted as TDS shall be refunded or used against your tax liability at the time of filing of Income Tax Return. Due to this, funds of taxpayers remain blocked for the entire year.
- The condition of filing ITR is for all last 3 years. If you have filed ITR for only 1 or 2 years, then rate of TDS shall be 2% up to 1 Crore and 5% for amount exceeding 1 crore respectively.
