Section 194N - TDS on Cash Withdrawals
Section 194N was inserted under the Income Tax Act in 2019 to provide for TDS deduction by the bank or post office (as the case may be) on cash withdrawals made by any person from his account.
Threshold Limits
1) The tax would be deducted only when the aggregate amount of cash withdrawal during the financial year by a person from one or more of his accounts exceeds Rs. 1 crore on the amount exceeding such threshold.
2) However, the Finance Budget 2020 had reduced the threshold limit for TDS to Rs. 20 lakh for taxpayers who have not filed their income tax returns for the past three years.
Rate of TDS
TDS shall be deducted @ 2% on the amount of cash withdrawal exceeding Rs. 20 lakh or 1 crore, as the case may be.
Immediate Steps to be Taken
Since a number of businesses regularly require withdrawal of cash for making petty expenses that add up to an amount exceeding Rs. 20 lakh during the year, we recommend that you send the following letter to your bankers with whom you hold your business current account, informing them that you have been filing your tax returns for the past three years, so that they do not erroneously start deducting tax on your cash withdrawals exceeding Rs. 20 lakh in the year.
******
Date:
The Manager
___________ Bank
___________ Branch
Sub: Deduction of TDS on aggregate cash withdrawal exceeding Rs. 20 lakh as per Section 194N of the Income Tax Act for PAN ___________ for FY 2020-21
We _________________________ (name of account holder) bearing PAN _____________ hereby confirm that we have linked our PAN with Adhaar, or will link our PAN with Adhaar by the due date prescribed in Section 139AA of the Income Tax Act, 1961 (“Act”).
We intend to withdraw cash exceeding Rs 20 lakh during the financial year 2020-21 and confirm that:
a) Income Tax Returns have been filed for the past 3 years by us.
or
a) Income Tax Returns were not required to be filed for the past 3 years by us.
b) Whatever I have stated above is true and correct, and in case any of the above information is found
to be false, the Bank shall deduct tax at a higher rate as may be applicable and recover the differential TDS amount along with any interest and penalty according to the relevant provisions of the Act.
c) We hereby agree to indemnify and keep indemnified the Bank against any loss or damages that
may be caused to the Bank by reason of incorrect/false information provided by me/us to the Bank
and the Bank having acted upon the same.
Thanking you
Yours faithfully
Signature: __________________________
Customer ID : ______________________
Acct Number :_______________________
