CENTRAL Budget 2019 has introduced Section 194N for deduction of Tax at Source (TDS) of 2% on the cash withdrawal of more than Rs. 1 crore from a bank account in one financial year, to discourage business payments in cash.
Whereas the budget 2020 has reduced the threshold limit for TDS to Rs 20 lakh for taxpayers who have not filed their income tax returns for past three years. Such taxpayers withdrawing cash in excess of Rs 20 lakhs will have to pay 2% up to Rs. 1 Crore and @ 5% above Rs. 1 Crore, as TDS.
Those Tax Payers who have filed their returns for the past 3 years will be subjected to TDS @ 2 % over and above Rs. 1 Crore only.
Section 194N is applicable in case of cash withdrawals of more than Rs 1 crore during a financial year. This section will apply to all the sum of money or an aggregate of sums withdrawn by a person in a financial year.
The section will apply to withdrawals made by any taxpayer including:
Individual
Hindu Undivided Family (HUF)
Company
Partnership firm or an LLP
Local authority
Association of Person (AOPs) or Body of Individuals (BOIs)
The Institution 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
The provisions of this section will not apply to the following entities.
Any Government body
Any Bank including co-operative banks
Any business correspondent of a banking company (including co-operative banks)
Any white label ATM operator of any bank (including co-operative banks)
Any other person notified by the government
Rate of TDS under Section 194N
The payer Institutions 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.
In case the person receiving the money has not filed income tax return for three years 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.
Rate of TDS will be 20%, if the deductee furnishes no PAN or incorrect PAN details.
CA. Mohamed Asharaf, FCA, DISA (ICA)
CHARTERED ACCOUNTANT
+91 9447746535; auditorindia@gmail.com, www.ashraffca.com, www.numerzone.com.
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