The First Fiscal Budget being presented by Honorable Minister of Finance Nrimala Sitaraman in 2019 introduced a new section 194N which will attract a TDS on cash withdrawals in excess of Rs. 1 Crore and is in force with effect from 1st September, 2019. For calculating the limit of 1 Crore, all bank accounts maintained by an assessee with one bank will be considered. The reason behind the introduction of section 194N was to boost the digital India initiative and encourage cashless transactions.
Rate of TDS u/s 194N
TDS at the rate of 2% will be deducted from the cash withdrawal exceeding Rs. 1 Crore. For instance if an assessee withdraws 1.2 Cr from him bank account 2% TDS on Rs. 20 Lakhs i.e Rs. 40,000 TDS will be deducted u/s 194N.
Persons responsible for deduction of TDS u/s 194N
Following persons are liable to deduct TDS u/s 194N
- A Banking Company
- A Co-Operative Society engaged in banking business.
- A Post Office
Exceptions to section 194N
TDS u/s 194N will not be deducted in case of payment being made to the following class of persons;
- A Government of India Enterprise
- A Banking company
- A Co-operative society engaged in banking business
- A business correspondent authorized by RBI
- Any ATM operator authorized by RBI
- Any other person or class of persons which the Central Government may notify from time to time
As per the notification no. 70/2019 dated 20th September, 2019, TDS u/s 194N will not be deducted on the cash withdrawals made by ;
a. Commission Agents or
b. Traders operating under Agricultural Produce Market Committee (APMC) for the purpose of making payment to the farmers towards the purchase of agricultural produce.
Read the full text of the notification on the given link;
https://www.incometaxindia.gov.in/communications/notification/notification_70_2019.pdf
Frequently Asked Questions
Q. Lower deduction of TDS can be submitted for the TDS u/s 194N?
A. No, lower TDS deduction certificate cannot be submitted against the provisions of section 194N.
Q. If I withdraw cash of Rs. 1 Cr will it attract TDS u/s 194N?
A. No, Section 194N gets attracted when the amount is withdrawn in excess of Rs. 1 Cr.
Q. The limit of Rs. 1 Cr is per bank or per account?
A. The limit is per bank rather then per account, hence an assessee can withdraw in multiples of Rs. 1 Cr from multiple banks without the TDS being deducted u/s 194N.
Q. Credit of TDS deducted u/s 194N can be claimed in ITR?
A. Yes, the credit of TDS deducted u/s 194N can be claimed while filing ITR in the same manner as in case of other sections of TDS.
Click on the below link to read the full text of the section;
Read Budget 2019 highlights on below link;