TDS on Cash Withdrawal w.e.f. 1st July 2020: All You Need to Know

The recent changes introduced to ‘TDS on Cash withdrawals’ under Sec 194N of Income Tax Act.

The Finance Act, 2020 tightened the existing provisions for those who have not been filing income tax returns. This will be applicable from July 1, 2020.

*2% TDS will apply on cash withdrawn  in a financial year exceeding Rs. 20 lacs and up to Rs. 1 Crore.

*5% TDS will apply on cash withdrawn in a financial year, above Rs. 1 Crore.

The Amendment of Section 194N will be with effect from 1st July, 2020.

The section will apply to withdrawals made by taxpayers who are an individual, A Hindu Undivided Family (HUF), a Company, a partnership firm, or an LLP, a local authority, an Association of Person (AOPs) or Body of Individuals (BOIs).

However, this section will not be applicable to government bodies, banks including co-operative banks, business correspondents of a banking company, white-label ATM operator of any bank, farmers whom the Central Government specifies the commission agent or trader.

For example, if Mr. ‘Y’ has filed all his returns and if he withdraws cash up to Rs. 1 Crore then no TDS will be applicable. In case Mr. ‘Y’ withdraws cash which is more than Rs. 1 Crore then only 2% TDS will be applicable.

On the other hand if Mr. ‘Z’ has not filed all his returns and if he withdraws cash from Rs. 20 Lakh to Rs. 1 Crore then 2% of the TDS will be applicable. In case Mr. ‘Z’ withdraws cash which is more than Rs. 1 Crore then 5% TDS will be applicable.

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