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Section 194N: TDS on Heavy Cash Withdrawal from Banks/ Post Offices

Through the amendment in the Finance Act, 2020 section 194N was amended by substituting section 83A which imposes TDS at the rate of 2% on withdrawal of sum amount exceeding INR 1 crore. This section has been effected from 1st July 2020.

Every person including –

  • Individuals
  • HUF i.e. Hindu Undivided Family
  • Company
  • Partnership firms or Limited Liability Partnership (LLP)
  • Local authorities
  • Any AOPs (Association Of Person) or BOI (Body of Individuals)
  • Any other assesses

Withdraws cash in excess of INR 1 crore during a financial year attracts TDS under section 194N.

Who Is Responsible For TDS Deduction Under Section 194N?

A person (payer) who is making the payment in cash of an aggregate of INR 1 core is responsible for deducting TDS under this section. This includes-

  • Any bank comes under Banking Regulation Act, 1949
  • A co-operative society who is carrying on the business of banking
  • A post office

Who Are The Exempted Persons Under Section 194n Of The Act?

There is no deduction of tax if the amount is withdrawn from the following recipients-

  • By central or state government
  • Banks
  • Co-operative societies
  • Post office(v) Banking correspondents
  • White label ATM operators
  • Any other person notified by the central government in consultation with Reserve Bank of India.

What is the Rate of TDS?

The payer will deduct TDS at the rate of 2% on case withdrawal on the amount which is excess of INR 1 crore. For instance If a person withdraws INR 1 crore 50 lacs then TDS will be charged at the rate of 2% at INR 50 thousands i.e., 1000.

In case the person has failed to ITR filling for immediately three preceding financial year, the limit of tax deduction is INR 20 lacs

  1. At the rate of 2% on the amounts withdrawn from INR 20 lacs to INR 1 cr. &
  1. At the rate of 5% in excess of withdrawal of INR 1 crore.