Section 194N: TDS on Heavy Cash Withdrawal from Banks/ Post Offices

With the change to the Finance Act of 2020, section 194N was replaced with 83A, which applies a 2% TDS on withdrawals of more than Rs. 1 crore. This clause went into effect on July 1, 2020.

Every person including –
(i) Individuals
(ii) HUF
(iii) Company
(iv) Partnership firms or LLP
(v) Local authorities
(vi) Any association of person (AOPS) or Body of Individuals (BOI)
(vii) Any other assesses

TDS is levied on cash withdrawals in excess of Rs. 1 crore in a financial year under section 194N.

IN THIS SECTION, WHO IS RESPONSIBLE FOR TDS DEDUCTIONS?
Under this clause, the individual (payer) who makes a cash payment totaling 1 core is responsible for deducting TDS. This includes the following:
(i) Any bank covered under Banking Regulation Act, 1949
(ii) A co-operative society carrying on the business of banking
(iii) A post office

PERSONS EXEMPTED UNDER SECTION 194N OF THE ACT
If the funds are withdrawn from the following beneficiaries, no tax will be deducted:
(i) By central or state government
(ii) Banks
(iii) Co-operative societies
(iv) Post office(v) Banking correspondents
(vi) White label ATM operators
(vii) Any other person notified by the central government in consultation with RBI

TDS RATES
On any amount in excess of Rs. 1 crore, the payer shall deduct TDS at a rate of 2% on case withdrawal. As an example. If a person withdraws Rs. 1,00,50,000, TDS of 2% will be applied to Rs. 50000, or Rs. 1000.
The limit of tax deduction is 20 lakhs if a person has failed to file the ITR for the previous three financial years.
i) @2% on the amounts withdrawn from 20 lacs to Rs. 1 cr. And
ii) @ 5% in excess of withdrawal of Rs. 1 crore.