CBDT provides utility to ascertain applicable rate of TDS on cash withdrawals

The Finance (No. 2) Act, 2019 had inserted Section 194N in the Income Tax Act, 1961 (ITA) to provide for levy of Tax Deducted at Source (TDS) at the rate of 2% on cash withdrawal exceeding INR 10 Million from a Bank/Post Office account(s) subject to certain exceptions.

It was noticed that a huge amount of cash is being withdrawn by the persons who have never filed Income Tax Returns. To ensure filing of the Income Tax Returns by such persons and to keep track on cash withdrawals by the non-filers and curb black money, the Finance Act, 2020 lower the threshold of cash withdrawal to INR 20 lakh for the applicability of the TDS for non-filers and mandated higher rate of TDS at the rate of 5% on cash withdrawal exceeding INR 10 Million by the non-filers with effect from 1 July 2020.

Accordingly, TDS provisions as per the amended Section 194N of the ITA with effect from 1 July 2020, applicable for Banks, Post Offices and Cooperative Societies are as follows:

• In a case where the recipient has filed the Income Tax Returns for all the three Assessment Years relevant to the three Previous Years, the TDS shall be required to be deducted at the rate of 2%, if the aggregate amount of cash withdrawals during the previous year is exceeding INR 10 Million
• In a case where the recipient has not filed the Income Tax Returns for all the three Assessment Years relevant to the three Previous Years for which the time limit to file Income Tax Return under Section 139(1) of the ITA has expired, TDS shall be required to be deducted at the following rates:a) At the rate of 2%, if the aggregate amount of cash withdrawals during the Previous Year exceeds INR 2 Million b) At the rate of 5%, if the aggregate amount of cash withdrawals during the Previous Year exceeds INR 10 Million

In this regard, the Central Board of Direct Tax (CBDT) in a press release dated 12 July 2020 stated that the Income Tax Department has facilitated a new functionality for Banks and Post offices through which they can ascertain the applicable rates of TDS on cash withdrawal of above INR 2 Million in case of a non-filer of the Income Tax Return and that of above INR 10 Million in case of a filer of the Income Tax Return.

This functionality is available with effect from 1 July 2020 as “Verification of applicability u/s 194N” on the web-portal of the Income Tax Department (www.incometaxindiaefiling.gov.in). It is also made available to the Banks through web-services so that the entire process can be automated and be linked to the Bank’s internal core banking solution.

The Bank/ Post Office has to enter the Permanent Account Number (PAN) of the person who is withdrawing cash for ascertaining the applicable rate of TDS.

Tag: CBDT