TDS on Cash withdrawal - Section 194N
To minimize the cash transaction and to promote digital payment modes like NEFT, IMPS, UPI, E-Wallet, POS, Mobile Banking, Internet Banking and so on, the Hon'ble Finance Minister has introduced TDS on Cash Withdrawal under Section 194N in the Union Budget 2019 (Section 194N is applicable w.e.f 01st September 2019) and Section 194N has been amended vide Clause 84 of The Finance Act 2020 (Amendment to Section 194N is applicable w.e.f 01st July 2020 discussed in later part of this article). In this article, we will talk about the TDS rate, Applicability of Section 194N, when to deduct TDS and other aspects of this provision.
WHO WILL DEDUCT TDS UNDER SECTION 194N?
Every person who is engaged in Banking Activities, namely:
a Banking Company (including any banking Institutions)
a co-operative society engaged in carrying on the business of banking
a Post Office
WHEN WILL TDS BE DEDUCTED UNDER SECTION 194N?
When a banking company as specified above pays any sum exceeding Rs.1 Crore in Cash (i.e account holder withdraws cash exceeding 1 crore) to recipient namely:
A Hindu Undivided Family (HUF)
A partnership firm or an LLP
A local authority
An Association of Person (AOPs) or Body of Individuals (Bois)
from one or more accounts maintained by the recipient, such banking companies are required to deduct TDS at 2% of the amount exceeding 1 Crore rupees.
TDS will be deducted by the payer while making payment exceeding Rs.1 crore. If the recipient withdraws money in intervals in such a case TDS will be deducted when aggregate of such amount from one or more account (considering all the Savings as well as Current Account in a bank, of the recipient) exceeds Rs.1 crore in a financial year.