TDS on Cash withdrawal of more than 1 Crore
In order to discourage cash transactions and move towards a cashless economy, a new Section 194N has been inserted under Income-tax Act with effect from September 1, 2019, to provide for deduction of tax on cash withdrawals made by any person from his bank or post-office account.
Deductor: Every banking company, co-operative bank or post office.
Time of Deduction: TDS under Section 194N tax shall be required to be deducted only when the aggregate amount of cash withdrawal during the previous year by a person from one or more of his bank or post office account, as the case may be, exceeds Rs. 1 crore. Further, the tax shall be required to be deducted only on the amount exceeding Rs. 1 crore.
Rate of TDS: 2%
Exceptions: No TDS when the recipient is the following,
(i) the Government;
(ii) any banking company or co-operative society engaged in carrying on the business of banking or a post office;
(iii) any business correspondent of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the guidelines issued in this regard by the Reserve Bank of India under the Reserve Bank of India Act, 1934;
- The bearer cheque of the bank does not fall in the definition of cash.
- TDS is deducted on payments made which tends exceeding 1 crore limit. For example, the aggregate payments made till the last payment was Rs 99,99,000/- and the present payment is Rs 10,000. The aggregate payments so made crosses and reaches Rs 1,00,09,000/-. Now the matter for consideration whether the TDS is on Rs 9,000 or on Rs 10,000. From the language of the provision, it is applicable at 2% of Rs 9,000 = 180 and the net payment to be made by a banker is Rs 9820.