Withdrawing cash and not filing ITR? Now pay TDS u/s 194N on cash withdrawals above Rs 20 lakh:

The Income Tax Department has facilitated a new functionality for banks and post offices through which they can ascertain the TDS applicability rates on cash withdrawals above Rs 20 lakh in case of a non-filer and above Rs 1 crore in case of a filer of the income tax return (ITR). So far, more than 53,000 verification requests have been executed successfully on this facility.

CBDT  said that this functionality available as “Verification of applicability u/s 194N” in since 1st July 2020 is also made available to the banks through web-services so that the entire process can be automated and be linked to the banks’ internal core banking solution.

As per Section 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.

Explaining the details of this facility, CBDT said that now banks/post offices have to only enter the PAN of the person who is withdrawing cash for ascertaining the applicable rate of TDS. On entering PAN, a message will be instantly displayed on the departmental utility: “TDS is deductible at the rate of 2% if cash withdrawal exceeds Rs 1 crore” (if the person withdrawing cash is a filer of the income-tax return) and “TDS is deductible at the rate 2% if cash withdrawal exceeds Rs 20 lakh and at the rate of 5% if it exceeds Rs 1 Crore” (if the person withdrawing cash is a non-filer of ITR).

CBDT said that the data on cash withdrawal indicated that a huge amount of cash is being withdrawn by the persons who have never filed ITRs.

Thanks & Regards

CA Pankaj Kumar Mishra

Email-ID : fcapankajkumarmishra@gmail.com

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