Cash withdrawals exceeding Rs 1 cr prior to Sept 1 will not be subjected to TDS, but there is a catch

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Published: September 1, 2019 11:21:32 AM

Keeping the people's concern in view, the Income Tax Department has clarified that cash withdrawals prior to September 1, 2019 will not be subjected to TDS under section 194N of the I-T Act.

TDS on Cash withdrawals exceeding Rs 1 crore, TDS, cash withdrawal, Budget 2019, Finance Act, section 194N, September 1Many people were confused whether TDS will be deducted on cash withdrawals exceeding Rs 1 crore, between April 1, 2019 and August 31, 2019 also.

In a bid to discourage the practice of making business payments in cash as well as move towards less-cash economy, Finance Minister Nirmala Sitharaman, in her maiden Union Budget presented recently, had announced that a TDS (tax deducted at source) levy of 2 per cent has to be made on cash withdrawals exceeding Rs 1 crore in a year, by a banking company or cooperative bank or post office. For this, the Finance (No. 2) Act, 2019 had inserted a new section – 194N – in the Income Tax Act, 1961, and the above section was to be made effective from September 1, 2019.

However, many people were confused whether TDS will be deducted on cash withdrawals exceeding Rs 1 crore, between April 1, 2019 and August 31, 2019 also. Keeping this in view, the Income Tax Department has clarified that cash withdrawals prior to September 1, 2019 will not be subjected to TDS under section 194N. However, since the threshold of Rs 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction u/s 194N will be counted from April 1, 2019.

The I-T Department said in a tweet, “Since the section provided that the person responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year to deduct income tax @2% on cash payment in excess of rupees one crore, queries were received from the general public through social media on the applicability of this section on withdrawal of cash from 01.04.2019 to 31.08.2019.”

To dispel the concerns of the people, CBDT clarified that section 194N will come into effect from September 1, 2019. Hence, any cash withdrawal prior to 1st September, 2019 will not be subjected to the TDS under section 194N of the I-T Act. However, “since the threshold of Rs 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction under section 194N of the Act shall be counted from 1st April, 2019. Hence, if a person has already withdrawn Rs 1 crore or more in cash up to 31st August, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the 2 per cent TDS will apply on all subsequent cash withdrawals.”

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