Cash withdrawals from the post office small savings schemes will be subject to tax deducted at source (TDS) if the amount exceeds Rs 1 crore in one financial year. The Department of Posts under the Ministry of Communication in an Order — dated January 9, 2020 — to all head post offices has informed about the deduction of TDS of 2 per cent in respect of cash withdrawals of over Rs 1 crore by an account holder of the National Savings Scheme. The cash withdrawals will be applicable to account holders in all types of small savings schemes or certificates taken together, from l.4.2019 onwards.
However, for the current financial year (2019-20) as per clarification issued by CBDT, the TDS will be deducted on cash withdrawals taken on or after 1.9.2019, even if cash withdrawals are taken in excess of Rs.1 crore from 1.4.2019 to 31.9.2019.
The TDS of 2 per cent is to be deducted on all subsequent cash withdrawal (from 01.09.2019) to be taken by the investor who has taken cash withdrawals in excess of Rs.l crore during 2019-20 in his/her all accounts. Post offices have to ensure that the PAN number of such account holder is recorded in the system.
The Government of India has inserted section 194N in the Income Tax Act, 1961, through Finance Act (No.2) 2019 for deduction of TDS of 2 per cent on cash withdrawals in excess of Rs.1 crore in a year, from 1.9.2019, and the new provision mentioned in section 194N is applicable from the financial year 2019-20.
There was, however, confusion as far as cash withdrawals made between April 1, 2019, and August 30, 2019, as the new section 194N came into effect from 1st September 2019. CBDT had earlier clarified on this matter – “..The CBDT, having considered the concerns of the people, hereby clarifies that section 194N inserted in the Act is to come into effect from 1st September 2019. Hence any cash withdrawal prior to 1st September 2019 will not be subject to the TDS under section 194N.
However, since the threshold of Rs. 1 crore is with respect to the previous year, calculation of the amount of cash withdrawal for triggering deduction under section 194N shall be counted from lst 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 Hence, if a person has already withdrawn Rs. 1 crore or more in cash up to 31st August 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the 2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 shall apply on all subsequent cash withdrawals made on or after 1st September 2019.”
