Section 194N: TDS on Cash Withdrawal From Banks/Office for the F.Y 2021-22

Last Updated On: Aug. 16, 2021, 10:35 p.m.
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SECTION 194N: TDS ON CASH WITHDRAWAL FROM BANKS/OFFICE FOR THE F.Y 2021-22

 

Who is responsible to deduct tax u/s 194N?

  • Every person, being
  • a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
  • a co-operative society engaged in carrying on the business of banking;
  • or a post office,

who is responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year, to any person (herein referred to as the recipient) from one or more accounts (savings/current )maintained by the recipient with it

 

Who is the Payee?

TDS deduction on cash withdrawal u/s 194N is applicable to all taxpayers, 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)

Are there any exemptions to TDS on cash withdrawal u/s 194N?

No tax shall be deducted if amount is withdrawn from the bank or post office by following recipients:

  • Central or State Government
  • Banks
  • Co-op. Banks
  • Post Office
  • Banking correspondents
  • White label ATM operators
  • Other persons notified by the in consultation with the RBI

Such other person or class of persons as notified by Central Government

1.Cash Replenishment Agencies (CRA's) and franchise agents of White Label Automated Teller Machine Operators (WLATMO's)

2.Commission agent or trader, operating under Agriculture Produce Market Committee (APMC), and registered under any Law relating to Agriculture Produce Market

3.The authorized dealer and its franchise agent and sub-agent and Full-Fledged Money Changer (FFMC) licensed by the RBI and its franchise agent

 

Rate & Threshold limit of TDS under Section 194N

(i) If an individual receiving the money has filed income tax return for any of the three years immediately preceding the year, then TDS to be deducted is an amount equal to 2% of withdrawal sum exceeding one crore rupees

(ii) If an individual receiving the money has not filed income tax return for all the three years, for which the time limit of filing return of income under Section 139(1) has expired, immediately preceding the year, then the TDS is 2% on the cash payments/withdrawals of more than Rs 20 lakh and up to Rs 1 crore, and 5% for withdrawal exceeding Rs 1 crore. (Amendment w.e.f 01.07.2020)

It is to be noted that there is a difference of opinion regarding the returns of income for all of the three assessment years relevant to the three previous years, for which the time limit to file return of income u/s 139(1) has expired, immediately preceding the previous year in which the payment of the sum is made to him. In this connection, it is to be noted that the expiry of time limit u/s 139(1) is the cutoff date for the previous year in which the amount is withdrawn from the bank. It means that if the date of return u/s 139(1) has not expired ,then that assessment year is not to be taken in account. In this connection, it is to be noted that the correct way to interpret this would be to first consider date of payment i.e. date on which cash withdrawal is proposed to be made and then check for the three preceding assessment years where the due date for filing tax return under section 139(1) has expired. It means that in the year of cash withdrawal from the bank, the income tax return for the preceding previous year shall not be considered till the expiry of time limit u/s 139(1) or such extended time by the Central Board of Direct Taxes.   

 

Is this section applicable to Non-resident?

The section applies to cash withdrawals made by resident as well as Non-resident. Therefore, if a NRI withdraws an amount of Rs 150 lakhs on 15.02.2020 from his NRE Account maintained in India, the bank shall deduct TDS of Rs 1,00,000.

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