TDS on Cash Withdrawal from Bank: Section 194N
In order to do a surgical strike on cash transactions and move towards a cashless economy, a new Section 194N has been inserted under the Income-tax Act 1961 to provide for deduction of tax on cash withdrawal made by any person from his bank or post-office account and the said section was effective from 1st of July' 2020
Below are the written summary points of Section 194N of the Income Tax Act.
Deductor:
Bank (Private/Govt), Co-operative bank or a post office
Deductee:
Individual, Hindu Undivided Family (HUF), Company, partnership firm, LLP, local authority, Association of Person (AOPs) or Body of Individuals (BOIs)
When Deductible:
Tax is deductible at the time of payment of cash
Lower TDS Certificate:
Option not Available
Threshold limit of TDS Deduction:
- The cash withdrawal limit for this F/Y will be considered starting from 01.04.2020
- It includes cash withdrawals from any type of accounts being maintained by the recipient with the bank or post office like a savings account, current account, etc. The limit of Rs. 1 crore is bank-wise and not branch wise
- If aggregate payment in cash from one or more accounts during a previous year to an account holder exceeds the threshold limit as prescribed in the below table
Exemption for withdrawal:
Government bodies, banks including co-operative banks, business correspondents of a banking company, white-label ATM operator of any bank, farmers whom the Central Government specifies the commission agent or trader.
CBDT exempts cash withdrawal by the authorized dealer and its franchise agent and sub-agent, and Full-Fledged Money Changer (FFMC) licensed by the Reserve Bank of India and its franchise agent from TDS under Section 194N
Treatment in Books of Accounts
Normal treatment just like Normal TDS Receivable deducted by any deductor, You will have to book TDS in your books of accounts once deducted by the Tax Deductor viz-a-viz reflected in your Form 26AS on Traces.
You have to claim such TDS at the time of filing your Income Tax Return.
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