Every person, being, —
(i) a banking company to which the Banking Regulation Act, 1949 applies
(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 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
Who shall be the deductor?
(i) a banking company to which the Banking Regulation Act, 1949 applies
(ii) a co-operative society engaged in carrying on the business of banking; or
(iii) a post office
What shall be the rate of TDS?
2% of cash withdrawal on amount exceeding Rs one crore/ more in a FY.
If ITR not filled 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 :
2% of cash withdrawal on amount exceeding Rs twenty lacs but upto one crore in a FY
5% of of cash withdrawal on amount exceeding Rs one crore or more in a FY
How limit is to be calculated?
You should keep in mind the following points:
a. Limit is to be checked bank wise and not branch wise.
b. Aggregate of all bank accounts (current savings etc) with the respective bank is to be taken in to account.
c. aggregate cash withdrawal from respective bank during the entire financial year is to be calculated.
How TDS is to be calculated?
A. Those who have filled tax returns for any of 3 preceding FY:
cash withdrawal
Rs 0 to Rs 1 Crore ---- TDS 0%
Above Rs 1 Crore ---- TDS 2% (amount withdrawn less 1 crore)
B. Those who have not filled any of the tax returns for 3 preceding FY:
cash withdrawal
Rs 0 to Rs 20 lacs ---- TDS 0%
Above 20 lacs but upto 1 crore ----- TDS 2% (amount withdrawn less 20 lacs)
Above Rs 1 Crore ---- TDS 5% (amount withdrawn less 1 crore)
How can deductor verify that recipient has filled tax returns?
to verify status of ITR filled of deductee, utility has been recently launched at income tax website.
Will the amount of withdrawal be treated as income?
The sum deducted in accordance with the provisions of section 194N for the purpose of computing the income of an assessee, shall not be deemed to be income received – section 198
What if the recipient is under no obligation to file tax returns?
persons to which liability to file ITR doesn’t attract – normal provision i.e. TDS @ 2% shall be applicable.
Does the purpose of cash withdrawal affect?
Purpose of cash withdrawal is irrelevant
Who shall be the deductee?
Any person including Individual, Hindu Undivided Family (HUF), Company, partnership firm / LLP, AOP / BOI, local authority.
Are there any exceptions to the rule?
It shall not 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 authorization issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007.
(v) any other that CG may notify (in consultation with the Reserve Bank of India)