TDS on Cash Withdrawals-Section 194N

Section 194N : TDS on Cash Withdrawals

• TDS will be deducted @ 2 % on Cash Withdrawals exceeding 1 Cr during a Previous year. The TDS will be deducted on the withdrawals in excess of 1 Cr. For Example, If cash withdrawal during the year is 1.2 Cr, TDS @ 2 % will be deducted on 20 Lacs only
• TDS will be deducted by Banks, Post office or Co-operative banks
• The limit of 1 Cr is for all accounts maintained by assessee with the same bank. For Example, if Assessee has 3 accounts with ICICI bank , and Cash withdrawn from each account is Rs. 40 lacs each. Then total cash withdrawn is 1.2 Cr, hence TDS will be deducted on 20Lacs
• Exception to the above Rule : If Assessee has not filed ITR in All of the three Preceding previous years, then limit of Cash withdrawal will become 20Lacs If Cash withdrawn is between 20 lacs to 1 Cr, then TDS @ 2 % to be deducted and if cash withdrawal exceeds 1 Cr , TDS @ 5% will be deducted
• The provisions of this section will not apply for Payment to: Government or Other banks, Post Offices or Co-operative banks Any White Labels ATMs
• W.e.f. 1.04.2023, TDS threshold for Co-operative banks increased to 3 Cr.

Section 194N of the Income Tax Act:- Payment of certain amounts in cash

Every person, being,—

(i) a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);

 (ii) a co-operative society engaged in carrying on the business of banking; or

(iii) a post office,

who is responsible 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 two per cent of such sum, as income-tax:

Provided that in case of a recipient who has not filed the returns of income for all of the three assessment years relevant to the three 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, the provision of this section shall apply with the modification that—

(i) the sum shall be the amount or the aggregate of amounts, as the case may be, in cash exceeding twenty lakh rupees during the previous year; and

 (ii) the deduction shall be—

(a) an amount equal to two per cent of the sum where the amount or aggregate of amounts, as the case may be, being paid in cash exceeds twenty lakh rupees during the previous year but does not exceed one crore rupees; or

(b) an amount equal to five per cent of the sum where the amount or aggregate of amounts, as the case may be, being paid in cash exceeds one crore rupees during the previous year:

Provided further that the 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:

Provided also that nothing contained in this section shall apply to any payment made to—

(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 (2 of 1934);

(iv) any white label automated teller machine operator of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007 (51 of 2007):

Provided also that the Central Government may specify in consultation with the Reserve Bank of India, by notification in the Official Gazette, the recipient in whose case the provision of this section shall not apply or apply at reduced rate, if such recipient satisfies the conditions specified in such notification.