Section 194N -TDS on cash withdrawal

Section 194N -TDS on cash withdrawal

1. Section 194N is applicable on more than Rs 1 crore cash withdrawals
2. from the bank account during a financial year. It will apply to the withdrawal of all the sums of money or an aggregate of sums from a particular bank in a financial year. The section will apply to withdrawals made by any taxpayer, including:

• An individual
• A Hindu Undivided Family (HUF)
• A company
• A partnership firm or an LLP
• An Association of Person (AOPs) or Body of Individuals (BOIs)

It shall not apply if payment is made to

1. The Government
2. Any bank (private or public sector)
3. A co-operative bank
4. A post-office
5. Business correspondents of a banking company
6. White Label ATM operators of any Bank
7. Specified trader or commission agents operating under the Agriculture Produce Market
8. Committee (APMC) vide Notification No. 70/2019-Income Tax Dated 20th September, 2019.
9. An authorized dealer or agent/sub-agent of its franchise,
10. A RBI licensed Full-Fledge Money Changer (FFMC) or any agent from its franchise subject to conditions as per Notification No. 80/2019-Income Tax dated 15th October, 2019.
    Any other person notified by the Government of India

Calculate the threshold limit

1. The limit of Rs 1 crore in a financial year is with respect to per bank or post office account and not per the taxpayer’s account.
2. The cash withdrawal made by any taxpayer from the bank accounts maintained by such taxpayer (recipient) will only attract TDS under Section 194N

Who will deduct TDS U/S 194N

The person (payer) making the cash payment will have to deduct TDS under Section 194N. Here is the list of such persons:

• Any bank (private or public sector)
• A co-operative bank
• A post office

There are certain categories of persons (payee) to whom the provision of this section will not apply

1. Any government body
2. Any bank, including co-operative banks
3. Any business correspondent of a banking company (including co-operative banks)
4. Any white label ATM operator of any bank (including co-operative banks)
5. Trader of APMC paying to the farmers.
6. Any other person notified by the government

Rate of TDS

1. The payer will have to deduct TDS at the rate of 2% on the cash payments/withdrawals of more than Rs 1 crore in a financial year under Section 194N.
2. The payer should deduct TDS while making the cash payment over and above Rs 1 crore in a financial year to the payee.
3. If the payee withdraws a sum of money at regular intervals, the payer will have to deduct TDS from the amount once the total sum withdrawn exceeds Rs 1 crore in a financial year.

If the individual receiving the money has not filed an income tax return for three years immediately preceding the year, the tax deduction limit is reduced to Rs 20 lakh.

The TDS will be deducted at:
–2% on the cash payments/withdrawals of more than Rs 20 lakh and up to Rs 1 crore
-5% for withdrawal exceeding Rs 1 crore