TDS on cash withdrawal under section 194N

T.D.S
New rule for Cash withdrawal Effective From 1-7-20

Section 194N of Income Tax Act
TDS on payment of certain amounts in cash
Who are liable to deduct?:
Bank, Co-operative bank or Post Office

Threshold limit:
If aggregate payment in cash from one or more accounts during a previous year to an account holder exceeds the threshold limit given below:

On or after 01.07.2020

Customer who have not filed their tax returns for the previous 3 years and for which the due date for filing tax return has expired:

  1. exceeding Rs. 20 lakh but not exceeding Rs. 1 crore:-TDS Rate-2%
  2. exceeding Rs. 1 crore:- Rate-5%

Customers other than mentioned above:

  1. up to Rs. 1 crore:- 0%
  2. exceeding Rs. 1 crore:-. 2%

The applicability of new provision as per amendments in the Finance Act 2020

The cash withdrawal limit for this F/Y will be considered from 01.04.2020

Deductible: Tax is deductible at the time of payment of cash.

Can the person file application for Lower TDS Certificate: ?
Not Possible

Any Exemption:?
Exemption is available, when payment is made to certain recipients, such as the government, banking company, co-operative society engaged in carrying on the business of banking, post office, banking correspondents and white label ATM operators, who are involved in the handling of substantial amounts of cash as a part of their business operations.

The Central Government has exempted the following recipients:
Persons specified by the Central Government

TDS provisions of section 194N are not applicable only if certain conditions are satisfied(..)

1.Cash Replenishment Agencies (CRA’s) and franchise agents of White Label Automated Teller Machine Operators (WLATMO’s)

(If these persons maintain a separate bank account from which cash withdrawal is made only for the purpose of replenishing cash in ATM operated by such WLATMO have furnished a monthly certificate to the bank certifying that cash withdrawal has been reconciled with the amount of cash deposited in the ATMs.)

2.The commission agent/trader, operating under Agriculture Produce Market Committee (APMC) and registered under any law relating to APM of the concerned state.
(If these persons have certified to the banking company/co-operative society/post office that cash withdrawal (in excess of Rs. 1 crore in the previous year) is for the purpose of making payments to the farmers on account of purchase of agriculture produce.)

  1. An authorized foreign exchange dealer and its franchise agent/sub-agent

Full-Fledged Money Changer licensed by RBI and its franchise agent

(If cash withdrawal is made only for the purpose of foreign currency from foreign tourists or non-residents visiting India or from resident Indians on their return to India, in cash as per the RBI directions or guidelines. These persons are not subject to TDS provisions of section 194N if cash withdrawal is made by these persons for the purpose of disbursement of inward remittances to the recipient beneficiaries in India in cash under Money Transfer Service Scheme of RBI.)

Above specified persons can withdraw cash without TDS under section 194N.

Tax deducted under section 194N shall not be deemed to be income received for computing income of the recipient.