In order to discourage cash transactions and move towards cash-less economy, a new Section 194N had been inserted under Income-tax Act in the Union Budget 2019 to provide for deduction of tax on cash withdrawals made by any person from his bank or post-office account. Further, Finance minister, Ms. Nirmala Sitharaman had amended certain provisions of Sec. 194N vide Clause 84 of Finance Act 2020 which is effective from 1st July 2020.
| (A) AMENDMENT W.E.F. 01st July, 2020 |
The scope of sec. 194N has been extended.
A person who has not filed
his or its return of income for all
the last three consecutive assessment years prior to the previous year
in which cash is being withdrawn and the time limit to file the return of
income as prescribed in section 139(1) has expired (Referred as “Non-Filer”) then as per the amended provisions TDS on cash withdrawals shall apply as
under:
|
Aggregate amount of cash withdrawal
in a previous year |
TDS Rate |
|
Exceeding ₹ 20 lakhs upto ₹ 1 crore |
2% |
|
Exceeding ₹ 1 crore |
5% |
NOTE:
1.
If a person is withdrawing cash on July 7,
2020 then the last three assessment years shall be-
For July 7,
2020, the current F.Y. will be 2020-21(A.Y. 2021-22)
Last 3 A.Y.
|
Assessment Year |
Previous Year |
|
2020-21 |
2019-20 |
|
2019-20 |
2018-19 |
|
2018-19 |
2017-18 |
2.
As per amendment, Return is to be filed as per
time prescribed u/s 139(1) which means if any person had filed belated return
for any one of AYs then, the lower threshold of ₹ 20 Lakhs for TDS u/s 194N
will be attracted in such case. (In case due date is extended, the extended
due date shall be considered)
·
Applicability:
|
Payer (Person who will deduct TDS) |
Payee (Person whom TDS will be deducted
) |
|
ü Banks ü Co-operative Banks ü Post Office |
Applicable to all, EXCEPT Ø Government Ø Banks (including co-operative banks) Ø Any business correspondent of a bank authorised by RBI. Ø Any white label automated teller machine (ATM) operator authorised
issued by the RBI. Ø Cash Replenishment Agencies (CRA’s) and franchise agents of White Label
Automated Teller Machine Operators (WLATMO’s) [Notification No. 68/2019
dt. 18.09.2019] Ø Payments to the farmers on account of purchase of agriculture produce
by a commission agent or trader, operating under Agriculture Produce Market
Committee (APMC) and registered under any Law relating to Agriculture Produce
Market of the concerned State [Notification No. 70/2019 dt. 20.09.2019] Ø the authorised dealer andits franchise agent and sub-agent [Notification
No. 80/2019 dt. 15.10.2019] Ø Full-Fledged Money Changer (FFMC) licensed by the Reserve Bank of India
and its franchise agent [Notification No. 80/2019 dt. 15.10.2019] Ø Any other person which central government may specify by the
notification. |
·
Rate of TDS:
|
Aggregate
amount of Cash Withdrawals in a previous year |
In case of Non-filers as
explained above |
In case of other persons |
|
Upto₹
20 lakh |
NIL |
NIL |
|
More
than ₹ 20 lakh but upto ₹ 1 crore |
2% |
NIL |
|
More
than ₹ 1 crore |
5% |
2% |
(C) BARE TEXT
[Payment of certain amounts in cash.
194N. Every
person, being,—
(i) a banking company to which the Banking Regulation
Act, 1949 (10 of 1949) applies (including any bank or banking institution
referred to in section 51 of that Act);
(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 (herein
referred to as the recipient) 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:
Provided that
in case of a recipient who has not filed the returns of income 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, the provision of this section shall apply with the
modification that—
(i) the sum shall be the amount or the aggregate of
amounts, as the case may be, in cash exceeding twenty lakh rupees during the
previous year; and
(ii) the deduction shall be—
(a) an amount equal to two per cent of the sum where
the amount or aggregate of amounts, as the case may be, being paid in cash
exceeds twenty lakh rupees during the previous year but does not exceed one
crore rupees; or
(b) an amount equal to five per cent of the sum where
the amount or aggregate of amounts, as the case may be, being paid in cash
exceeds one crore rupees during the previous year:
Provided further that the Central Government may specify in
consultation with the Reserve Bank of India, by notification in the Official
Gazette, the recipient in whose case the first proviso shall not apply or apply
at reduced rate, if such recipient satisfies the conditions specified in such
notification:
Provided also that nothing contained in this section shall
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 authorisation issued by the Reserve
Bank of India under the Payment and Settlement Systems Act, 2007 (51 of 2007):
Provided also that the Central Government may specify in
consultation with the Reserve Bank of India, by notification in the Official
Gazette, the recipient in whose case the provision of this section shall not
apply or apply at reduced rate, if such recipient satisfies the conditions
specified in such notification.]
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