20/08/2020
TDS ON CASH WITHDRAWAL UNDER SEC 194N | NEW RULES OF TDS ON CASH WITHDRAWAL
Introduction of Sec-194N
This section applies to an aggregate of sums withdrawn from a particular payer in a financial year.
The Govt. has introduced Section 194N in the Union Budget 2019 in order to discourage cash transactions in the country and promote the digital economy.
for paying any sum, being the amount or the aggregate of amounts, as the case may be, in cash exceeding one crore rupees during the previous year,
to any person (herein referred to as the recipient) from one or more accounts maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to 2 per cent. of such sum, as income-tax.
(Finance Act’2019)
Who is responsible for deduct tds @ 2%
1. a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act);
2. a co-operative society engaged in carrying on the business of banking;
3. a post office,
CATEGORY OF RECIPIENT : 2 (finance act’2020)
For section 194N of the Income-tax Act, the following section shall be substituted with effect from the 1st day of July, 2020, namely:—
If not filed return for all of the three assessment years relevant to the previous years. for which the time limit of file return of income under sub-section (1) of section 139 has expired, immediately preceding the previous year in which the payment of the sum is made to him.
CASH WITHDRAWAL EXCEEDING RS.20 LAKH TO RS.1 CRORE -TDS @ 2%
CASH WITHDRAWAL EXCEEDING RS.1 CRORE -TDS @ 5%
NOTE : IF NOT HAVING PAN THEN TDS RATE @ 20%.
Central Government may specify in consultation with the Reserve Bank of India, by notification in the Official Gazette, the recipient in whose case the first proviso shall not apply or apply at reduced rate, if such recipient satisfies the conditions specified in such notification.
Applicability of Sec-194N
The section will apply to withdrawals made by following taxpayers:-
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)
SEC-194N not applicable to :
Where any payment is made to :
Government Body
Bank including co-operative banks or a post office.
Business correspondent of a banking company
White label ATM operator of any bank
Commission agent or trader, operating under Agriculture Produce Market Committee (APMC)– Notification No. 70/2019-Income Tax Dated 20th September, 2019
Central Government may specify other persons in consultation with the Reserve Bank of India, by notification in the Official Gazette.
Proviso to Sec. 198 of Income Tax Act’1961
The sum deducted in accordance with the provisions of section 194N shall not be deemed to be income received for the purpose of computing the income of assessee.
Credit of TDS Under sec-194N
Credit of tax deducted at source shall be given to the person from whose account tax is deducted and paid to the central govt. account for the assessment year relevant to the previous year in which such tax deduction is made.
NOTIFICATION NO.74/2019
Tds form 26Q & 27Q Amended to give effect of Sec-194N
Notification No.43/2020- 3rd July’2020
CBDT Press note , Dt.12.07.2020
CBDT provides Utility to ascertain TDS applicability rates on cash withdrawal
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