Section 194N - TDS on cash withdrawals in excess of INR 1 Crore


TDS on Cash Withdrawals

What is Section 194N?

Section 194N was inserted by the Finance (No. 2) Act, 2019 with effect from 01-September-2019.
This section is applicable in case of cash withdrawals of Rs. 1 crore during a financial year. The payer will be required to deduct tax at source while paying any sum exceeding Rs. 1 crore in cash to an account holder. 

Who is required to deduct TDS u/s 194N?

Following payer will require to deduct TDS at source:
  • A Bank
  • A Co-operative Bank
  • A Post Office
Which are the payee(s) where TDS is not required to be deducted?
  • Government or Government body
  • Banking Company
  • Co-operative society engaged in carrying on the business of banking
  • Post office
  • White label ATM operator of any bank also including co-operative banks
  • Any other person notified by the Government
When Tax at source will be required to be deducted?

TDS will be deducted by the payer when the cash payment is made over and above Rs. 1 crore in a financial year to payee. The tax will be deducted only on the amount exceeding Rs. 1 crore.

What is the rate of TDS under section 194N?

The tax will be deducted at following rates:

Period of payment

Threshold Limit

Rate of TDS

During 01-Sep-19 to 30-Jun-20   

Over and above 1 crore

2%

On or after 01-Jul-20

In case the recipient withdrawing the money has not filed income tax return for three years immediately preceding the year and the time limit to file the return of income u/s 139(1) is expired

  • On the cash  withdrawals of more than Rs 20 lakh but not exceeding Rs 1 crore
  •  On the cash  withdrawals exceeding  Rs 1 crore

 




2%

 

5%

Thresh hold limit exceeding Rs.1 crore other than above case

 2%


Other Points to be Remember:
  • The limit of Rs. 1 crore shall apply bank-wise and not branch-wise.
  • The limit of Rs 1 crore is with respect to per bank or post office account. For example, a person having four bank accounts with four different banks, he can withdraw cash of Rs 1 crore * 4 = Rs 4 crores without any TDS.
  • The limit shall apply if the aggregate amount of cash withdrawal in a financial year exceeds Rs. 1 crore from one or more bank accounts. The aggregate of cash withdrawal from all accounts of a bank such as savings account, current account, etc. shall be aggregated to determine the threshold limit.

Disclaimer:

The Purposes of the article is knowledge sharing while the information is believed to be accurate to the best of my knowledge and belief. I do not make any representation or warranties, express or implied, as to the accuracy or completeness of this information. I accept no responsibilities for any errors it may contain, whether caused by negligence or otherwise or for any loss, howsoever caused or sustained, by the person who relies upon it.

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