TDS U/S 194N: TDS ON CASH WITHDRAWAL
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.
Section 194N of Income Tax Act, 1961 mandates that TDS to be deducted on cash withdrawn from banks, Co. op. banks, Post office etc.
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: –
|
S.no |
Date of Payment to employee |
Date of crediting the party in books of accounts |
Date of TDS deduction |
|
1. |
30/04/2024 |
30/04/2024 |
30/04/2024 |
|
2. |
30/04/2024 |
01/05/2024 |
30/04/2024 |
|
3. |
01/05/2024 |
30/04/2024 |
01/05/2024 |
|
4. |
01/05/2026 |
30/04/2024 |
01/05/2026 |
The person (payer) making the cash payment will have to deduct TDS under Section 194N. Here is a list of such persons: –
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?
|
Total cash withdrawal by Mr. Budhiraja |
Rs. 1,10,00,000 |
|
Sum exceeding Rs. 1,00,00,000 |
Rs. 10,00,000 |
|
Rate of TDS |
2% |
|
Total TDS to be deducted by Bank |
Rs. 20,000 |
The TDS rate under this Section is: –
|
Sl no. |
Amount of cash withdrawal |
Person – not filed an income tax return for three years |
Other persons |
|
1. |
Upto Rs. 20 lakhs |
. Nil |
. Nil |
|
2. |
Rs. 20 Lakhs to Rs. 1 crore |
. . 2% |
. . Nil |
|
3. |
More than Rs. 1crore |
. 5% |
. 2% |
No TDS if: –
The due date for deposit of TDS is as below: –
|
Month |
Due Date |
|
April |
On or before 7th May. |
|
May |
On or before 7th June. |
|
June |
On or before 7th July. |
|
July |
On or before 7th August. |
|
August |
On or before 7th September. |
|
September |
On or before 7th October. |
|
October |
On or before 7th November. |
|
November |
On or before 7th December. |
|
December |
On or before 7th January. |
|
January |
On or before 7th February. |
|
February |
On or before 7th March. |
|
March |
On or before 30th April. |
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: –
|
Quarter |
Period |
Due date (TDS filing) |
|
1St quarter |
April-June |
31st July. |
|
2nd quarter |
July-September |
31st October. |
|
3rd quarter |
October- December |
31st January. |
|
4th quarter |
January- March |
31st May. |
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.
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.
|
Particulars |
Penalty |
|
TDS not deducted on time. |
1% per month or part of month. |
|
TDS deducted but not deposited before due date |
1.5% per month or part of month. |
|
TDS return not file on or before due date |
200 per day maximum till TDS amount. |
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 1st 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.
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