TDS on Cash Withdrawal u/s 194N: Everything You Need to Know

TDS on cash withdrawal: Cash payment will never end. However, cash is still a popular option for many. Cash is required. You can withdraw cash from your bank to do this. You may be required to pay TDS for cash withdrawals after a specific limit. TDS on cash withdrawals under section 194N is effective from the 1st of September 2019 or the financial year 2019-2020.

In order to discourage cash payments, the Finance Minister has introduced Section 194N into Union Budget 2019. This allows tax deduction at source (TDS), on cash withdrawals above Rs 1 crore.

Budget 2020 reduces the threshold for TDS under Section194N to Rs 20 lakh for taxpayers that have not filed income tax returns in the past three years.

TDS will be deducted at the prescribed rates if cash is taken by the taxpayer in excess of Rs 20 Lakh during the financial year.

What is Section 194N?

Section 194N applies to cash withdrawals exceeding Rs 1 crore. The bank account must be withdrawn during the financial year. It applies to all sums of money, or an aggregate of sums, that are withdrawn from a bank during a financial year.

This Section Applies to All Taxpayers Who Withdraw Money from A Bank.

• An individual
• A Hindu Undivided Family (HUF)
• A company
• A partnership firm or an LLP
• An Association of Person (AOPs) or Body of Individuals (BOIs)

But It Shall Not Apply if Payment Is Made To-

• The Government
• Any bank (private or public sector)
• A co-operative bank
• A post-office
• Business correspondents of a banking company
• White Label ATM operators of any Bank
• Specified trader or commission agents operating under the Agriculture Produce Market Committee (APMC) vide Notification No. 70/2019-Income Tax Dated 20th September, 2019.
• An authorized dealer or agent/sub-agent of its franchise,
• A RBI licensed Full-Fledge Money Changer (FFMC) or any agent from its franchise subject to conditions as per Notification No. 80/2019-Income Tax dated 15th October, 2019.
• Any other person notified by the Government of India.

Who Can Deduct Tds for Cash Withdrawl:

TDS is deducted by banks and post offices when cash is withdrawn in excess of the prescribed limit. TDS is charged when cash is taken from the account of the person at the bank or postoffice in excess of the prescribed limit in a financial calendar year. If you are a state or central employee, a bank, post office, or a correspondent of a banking institution, or an operator of white-level ATMs of banks, or a person notified on the advice by RBI, you don’t have to pay TDS.

How much TDS is deducted:

TDS at the rate 2% will apply to cash withdrawals exceeding Rs 1 crore if the cash withdraws person has filed Income Tax Returns (ITR) for any of the three prior assessment years.

TDS will also be charged at 2% for cash withdrawals above Rs 20 lakh, and 5% for withdrawals exceeding Rs 1 crore if there has been no ITR filed in the past three years.

1. What is the TDS on Cash Withdrawal?

Under section 194N of the Income Tax Act, 1961, any person (other than an individual or a Hindu Undivided Family) who withdraws cash exceeding Rs. 1 crore in a financial year from any bank account is liable to pay TDS at the rate of 2%.

2. Who is liable to pay TDS on cash withdrawals?

Any person (other than an individual or a Hindu Undivided Family) who withdraws cash exceeding Rs. 1 crore in a financial year from any bank account is liable to pay TDS at the rate of 2%.

3. What is the rate of TDS on cash withdrawals?

The rate of TDS on cash withdrawals is 2%.

4. What are the exceptions to the TDS on cash withdrawals?

There are no exceptions to the TDS on cash withdrawals.

5. What are the consequences of not paying TDS on cash withdrawals?

If a person fails to pay the TDS on cash withdrawals, he/she may be liable to pay a penalty of Rs. 10,000 under section271E of the Income Tax Act, 1961.

 FAQs on TDS on Cash Withdrawal:

Under section 194N of the Income Tax Act, any person who withdraws cash exceeding Rs. 1 crore in a financial year from his/her bank account(s) is liable to pay TDS at the rate of 2%. In this article, we shall discuss the applicability, rate and procedure for payment of TDS on cash withdrawal.

What is the TDS on Cash Withdrawal?

Under section 194N of the Income Tax Act, any person who withdraws cash exceeding Rs. 1 crore in a financial year from his/her bank account(s) is liable to pay TDS at the rate of 2%.

Who is liable to pay TDS on Cash Withdrawal?

Any person who withdraws cash exceeding Rs. 1 crore in a financial year from his/her bank account(s) is liable to pay TDS on cash withdrawal.

What is the rate of TDS on Cash Withdrawal?

The rate of TDS on cash withdrawal is 2%.

When is the TDS on Cash Withdrawal applicable?

The TDS on cash withdrawal is applicable when a person withdraws cash exceeding Rs. 1 crore in a financial year from his/her bank account(s).

How is the TDS on Cash Withdrawal paid?

The TDS on cash withdrawal is paid by deducting the amount at the time of withdrawal and depositing it with the government.

What are the consequences of non-payment of TDS on Cash Withdrawal?

If a person fails to pay the TDS on cash withdrawal, he/she may be liable to pay a penalty of up to Rs. 10,000. In addition, the person may also be liable to pay interest at the rate of 1% per month on the amount of TDS due.

Q.1. What is the maximum amount of cash that can be withdrawn without attracting TDS?

Ans. The maximum amount of cash that can be withdrawn without attracting TDS is Rs. 1 crore.

Q.2. When is the TDS on cash withdrawal applicable?

Ans. The TDS on cash withdrawal is applicable when a person withdraws cash exceeding Rs. 1 crore in a financial year from his/her bank account(s).

Q.3. What is the rate of TDS on cash withdrawal?

Ans. The rate of TDS on cash withdrawal is 2%.

Q.4. How is the TDS on cash withdrawal paid?

Ans. The TDS on cash withdrawal is paid by deducting the amount at the time of withdrawal and depositing it with the government.