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Section 194N – TDS on cash withdrawal of more than Rs. 1 crore
P K Gupta
May 3, 2020
7026
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Section 194N – TDS of withdrawal of more than Rs. 1 crore
In Union Budget 2019, new section 194N was inserted which was applicable from 1st September 2019. As per section 194N TDS is required to be deducted on cash withdrawal from Bank or Post Office.
Applicability of Section 194N:
If cash withdrawn by a taxpayer is more than Rs. 1 crore during the financial year from a particular payer, then payer shall deduct TDS on the withdrawal amount above Rs. 1 crore.
Rate of TDS:
TDS to be deducted @ 2% on amount of cash wothdrwan above Rs. 1 crore.
Aggregation of amount withdrawn from all branches of a bank:
While calculating the limit of Rs. 1 crore, the amount withdrawn from all the branches of a particular bank are to be aggregated.
Suppose Mr. X has withdrawn following amounts during FY 19-20 (all amounts after 1st September 2019)
From Karol Bagh Branch of IDBI Bank Rs. 25 Lakh
From CP Branch of IDBI Bank Rs. 30 Lakh
From South Ex Branch of IDBI Bank Rs. 60 Lakh
From Laxmi Nagar Branch of OBC Rs. 40 Lakh
From Preet Vihar Branch of SBI Rs. 95 Lakh
In the above example, total amount withdrawn from
IDBI Bank all the branches is Rs. 115 Lakh
OBC bank all the branches is Rs. 40 Lakh
SBI bank all the branches is Rs. 95 Lakh
As the limit of Rs. 1 crore is crossed by IDBI bank only, IDBI will deduct 2% tds on Rs. 15 lakh i.e Rs. 30,000/- and OBC bank & SBI will not deduct any TDS as the limit of Rs. 1 crore is not crossed by these banks individually.
Treatment of Amount withdrawn before 1st September 2019:
Though the Section 194N is applicable from 01st September 2019 i.e. TDS is to be deducted on the cash withdrawn after 1st September 2019 only, but cash withdrawn before 1st September 2019 is added for calculating the threshold limit of Rs. 1 crore. We can understand the same with the help of following example:
Mr. Raghav has withdrawn following amount of cash from HDFC bank in FY 2019-20:
On 28th June 2019 Rs. 80 lakh
On 05th Sep. 2019 Rs. 30 lakh
As Mr. Raghav has withdrawn total amount of Rs. 1.10 crore (80+30) in FY 2019-20, so the limit of Rs. 1 crore is crossed, because amount withdrawn before 1st September 2019 will be included to calculate the limit of Rs. 1 crore. So in this case Section 194N will be applicable.
So TDS is required to be deducted @2% but only on Rs. 10 lakh (110-100) i.e. Rs. 20000/- only.
Mr. Sanjay has withdrawn following amount of cash from HDFC bank in FY 2019-20:
On 28th July 2019 Rs. 110 lakh
On 07th Sep. 2019 Rs. 40 lakh
As Mr. Sanjay has withdrawn total amount of Rs. 1.50 crore (110+40) in FY 2019-20, so the limit of Rs. 1 crore is crossed, because amount withdrawn before 1st September 2019 will be included to calculate the limit of Rs. 1 crore. So in this case Section 194N will be applicable.
So TDS is required to be deducted @2% but only on Rs. 40 lakh i.e. Rs. 80000/- only as the TDS is not to be deducted on the amount withdrawn before 1st Sep. 2019. i.e. Rs. 1.10 crore.
Mr. Butra has withdrawn following amount of cash from HDFC bank in FY 2019-20:
On 18th June 2019 Rs. 170 lakh
In this case no any TDS is required to be deducted as the entire cash was withdrawn before 1st Sep. 2019.
Important points related with section 194N
- Lower TDS deduction certificate is not applicable for this section.
- This limit of Rs. 1 crore is for all accounts cumulatively i.e. current account and saving account and CC accounts.
- As per general view this TDS can be claimed as refund or adjusted against tax dues means we can take credit of this TDS as the same is reflected in 26AS.
But other view is supported by the language of section which depicts it as a levy of TDS and No levy like surcharge / Cess etc. can be claimed back as refund.
- There is one more ambiguity related with bearer cheque or demand draft as one view treats them equivalent to cash and other do not.
Non applicability of Section 194N:
(i) the Government;
(ii) any banking company
(iii) 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 RBI
(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 RBI
(v) such other person or class of persons, which the Central Government may, by notification in the Official Gazette, specify in consultation with the RBI
(vi) Commission Agents
(vii) Trader operating under agriculture produce market committee
for the purpose of making payments to farmers
Note: More amendments were made in this section on 27th March 2020 which will be applicable wef 1st July 2020. Will discuss those amendments separately.
