• By ADMIN
• Posted 02 Jul, 2020
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FAQ - TDS on Cash Withdrawal (Sec 194N - Income-tax Act, 1961)

1. What is Section 194N?
2. First Introduced via union budget 2019- Presented by hobble Finance Minister, Nirmala Sitaraman. As per this section TDS will be deducted on cash payments exceeding Rs.1Crore in any Previous Years. Applicable from 1^st September 2019. While calculating the limit of Rs.1Crore – All Accounts Maintained by a person with one bank are to be considered.

1. EXAMPLE: MR.X has withdrawn following amounts from various branches of SBI in the PY:

Rs.50L from Branch A

Rs.30L from Branch B

Rs.40L from Branch C

In this Case – 2% TDS would be deducted by SBI on Rs.20L

Solution:

2. Why Sec 194N has been introduced?

This to promote cashless economy development using Digital India.

3. Who has to Deduct TDS?

• A Banking Co (Whether Public / Private)
• A Co-Operative Society engaged in the Business of Banking
• A Post Office

4. Rate of TDS?

          2% - On Cash withdrawals in Excess of Rs.1CR

5. When to Deduct TDS?

          At the “Time of Making Payment”

6. When Sec.194N is Applicable?

When Payment is made to the following Persons:

• An Individual
• A HUF
• A Company
• A Partnership firm or LLP
• A Local Authority
• An AOP or BOI

7. When Sec 194N is NOT Applicable?

           When Payment is made to the following persons:

• Government
• Banking Company
• Co-Operative Society engaged in the Business of Banking
• Any Business Correspondent authorized by RBI
• Any White Label ATM Operator authorized by RBI
• Any other person which CG may specify by notification

• Notification Dated-20^th September 2019 (Applicable- W.E.F 1^st September 2019)

Commission Agent (or) Trader operating under Agricultural Produce Market Committee (APMC) – Making Payment to Farmers on account of Purchase of Agricultural produce.

The Banking Co (or) Co-op society (or) Post Office shall not Deduct TDS after ensuring the

• PAN quoted is Correct
• Commission Agent/Trader is registered under APMC
• Necessary evidence has been collected and placed on record

Notification Dated -15^th October,2019 (APPLICABILITY – W.E.F 1^st September 2019)

• The Authorised dealer and its franchise agent and Sub agent and
• Full-Fledged Money changer(FFMC) licensed by RBI and its franchise agent

Maintaining a separate bank account from which withdrawal is made only for the purpose of –

• Purchase of foreign currency from -foreign tourist (or) Non-Resident visiting India (or) from Resident Indians on their return to India in cash as per the directions issued by RBI (Or) Disbursement of Inward Remittances to the Recipient beneficiaries in India in cash Under MONEY TRANSFER SERVICE SCHEME(MTSS) of the RBI And Certificate is furnished by the Authorized dealer/its franchise agent/sub agent/FFMC & its franchise agent to Bank that the withdrawal is for the above mentioned purpose – shall Not Deduct TDS.Authorized dealer – definition as per FEMA

8.  Amended Scope of Section 194N : (w.e.f 01.07.2020)

• The Scope of TDS on Cash withdrawal has been extended.
• If the RECEPIENT has not Filed his Return of Income for 3 Consecutive Yrs and has withdrawn cash more than Rs.1Crore

9. Whether Recipient can claim credit of TDS u/s 194N?

Notification Dated- 27^th September 2019

In Rule 37BA ,after Sub Rule (3) the following Sub Rule has been Inserted, namely- For the purpose of Sec.194N, credit for TDS shall be given to the Person from whose account Tax is deducted and paid to the CG account for the AY relevant to the PY in which such Tax deduction has been made. i.e The TDS Credit is available in the year of deduction.

10. Applicability of Sec.194N on withdrawal of cash made between 1^StApril 2019 to 31^StAugust 2019?

Reference- Press Release dated 30^th August 2019

• Since Sec.194N is Effective from 1^st September 2019, any cash withdrawal prior to September 2019 will not be subjected to the TDS u/s 194N However the threshold of Rs.1Crore is wrt the PY- Calculation of amount of cash withdrawal for triggering deduction u/s 194N shall be counted from 1^st April 2019. Hence if a person has already withdrawn Rs.1Cr or More in cash up to 31^st August 2019 from one or more accounts maintained with a Banking company or a co-op Bank or Post office- 2% TDS shall apply on all SUBSEQUENT CASH WITHDRAWALS.

This FAQ prepared by Abirami Devasenapathy [CA Student]