SECTION 194N TDS ON CASH WITHDRAWAL

TDS U/S 194N: TDS ON CASH WITHDRAWAL

1. What do you mean by TDS?

TDS stands for Tax Deducted at Source. TDS is a kind of tax that is deducted by the payer before making certain payments like Salary, Rent, Commission, Interest, Royalty, Professional Fees etc. to the payee.

TDS is required to be deducted at the source if the money to be paid and the money already paid exceeds a specified amount.

The Payee can claim this tax deducted by the payer while paying his income tax liability for the year, and if the TDS deducted is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TDS was to reduce the Tax evasion by the person receiving the income.

Note: -

Payer- A payer is a person or organization who is responsible for deducting TDS before paying the amount to Payee.

Payee- A Payee is a person or organization who receives the payment from the payee after the TDS deduction.

2.  What is TDS under Section 194N of Income Tax Act?

Section 194N of Income Tax Act, 1961 mandates that TDS to be deducted on cash withdrawn from banks, Co. op. banks, Post office etc.

3. When is TDS to be deducted under Section 194N?

Normally the TDS is to be deducted at the time of payment or at the time of crediting the party in the books of accounts but in case of TDS u/s 194N the TDS must be deducted at the time of payment only.

Few examples of date of deduction are: -

4. Who is required to deducts TDS under Section 194N?

The person (payer) making the cash payment will have to deduct TDS under Section 194N. Here is a list of such persons: -

• Any bank (Private or Public sector).
• A Co- operative society.
• A post office.

NOTE: -

NO, TDS if the cash withdrawal is upto Rs. 1 crore during the Financial Year.

Example: -

Mr. Budhiraja has a savings account and a current account with IDFC bank. During the F.Y 2024-25, he withdraws cash of Rs. 50 lakhs from saving accounts and Rs. 60 lakhs from current account. What will be the rate of TDS u/s 194 and the amount to be deducted by Bank?

5. Rate of TDS under Section 194N?

The TDS rate under this Section is: -

6. Exemption under Section 194N?

No TDS if: -

• The amount withdrawal is upto Rs. 1 crore.
• The person has not filed income tax return for 3 years and withdrawal is upto Rs. 20 lakhs.
• Cash withdrawal by government.
• Cash withdrawal by Banks, Co-op Bank, Post office and their business correspondent.
• Cash withdrawal by ATM operator of banks or Co-op Bank.
• Cash withdrawal by Cash replenishment agencies and franchise agents of White label ATM operators in respect of withdrawal made from a separate bank maintained only for replenishing cash in ATM.
• Cash withdrawal by Registered Commission agent/ trader operating under Agriculture Produce Market Committee (APMC) and certifies that withdrawal is made for making payments to farmers.
• Cash withdrawal by Authorized dealers, Full Fledged Money Changer (FFMC), their franchise agent and sub- agent in respect of withdrawal made for purchasing foreign currency from NR/ foreign tourist visiting India or resident Indians on their return to India for disbursement of Inward remittances to recipient beneficiaries in India in cash under Money Transfer Service Scheme.

7. Time limit for deposit of TDS under Section 194N?

The due date for deposit of TDS is as below: -

8. What is the due date for filing of TDS return under Section 194N?

TDS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates: -

9. Type of TDS return & form to be issued?

TDS under this section has to filed quarterly through FORM 26Q and the deductor has to issue FORM 16A to the employee after filing of return.

10. Fees/ Penalties for Late/ Non- Filing of TDS u/s 194N?

Following penalties/fees will be levied if there is delay in TDS deduction or delay in deposit of TDS or non-filing of quarterly return.

FREQUENTLY ASKED QUESTIONS?

Q. Is there any threshold under Section 194N?

A. If the payee has not filed income tax returns for the last 3 years, then the threshold will be Rs. 20 lakhs otherwise the threshold will be Rs. 1 crore.

Q. Is 194N applies to non-residents?

A. Yes, Section 194N also applies to withdrawal made by the non-resident.

Q. From when TDS under Section 194N is applicable?

A. TDS on cash withdrawal u/s 194N is applicable starting 1^st September 2019.

Q. Can we claim TDS on cash withdrawal u/s 194N?

A. Yes, payee can claim TDS while filing their return.

Q. What is the TDS rate if PAN is not available, or PAN is not linked to AADHAR?

A. If PAN is not available or PAN and AADHAR are not linked to each other then the TDS rate will be 20% and threshold will be Rs. 20 lakhs.