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There is no deduction of tax if the amount is withdrawn from the following recipients-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
- At the rate of 2% on the amounts withdrawn from INR 20 lacs to INR 1 cr. &
- At the rate of 5% in excess of withdrawal of INR 1 crore.