2% TDS on cash withdrawals from banks/post offices with effect from 01.09.2019-New Section 194N

2% TDS on cash withdrawals from banks/post offices with effect from 01.09.2019-New Section 194N

In order to further discourage cash transactions and move towards less cash economy, the Union Budget 2019-20 has proposed to insert a new section 194N.

Section 194N – Payment of certain amounts in cash

The new section provide for levy of TDS at the rate of 2 % on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from an account maintained by the recipient.

It has been proposed to exempt payment made to certain recipients, such as the Government, banking company, cooperative society engaged in carrying on the business of banking, post office, banking correspondents and white label ATM operators, who are involved in the handling of substantial amounts of cash as a part of their business operation, from the application of this provision.

It is proposed to empower the Central Government to exempt other recipients, through a notification in the official Gazette in consultation with the Reserve Bank of India.

This amendment will take effect from 1st September, 2019.

TDS on cash withdrawals per account or in aggregate?

There seems to be some confusion in the minds of public at large as to whether the threshold of Rs. 1 crores is with respect to cash withdrawal per bank account or is it applicable to aggregate withdrawals per bank?

Please note the liability has been fastened on the banking company/co-operative society/post office and not to a branch of it. Secondly the section section clearly talks of “aggregate of sums” paid which leaves no doubt that the said threshold is with respect to per bank/post office and not individual account.

Example-1

A person has one account each with three different banks. He can withdraw  Rs. 1 crores x 3 banks = 3 crores without TDS

Example-2

A person has three account in three different/same branches of one bank. He can withdraw  Rs. 1 crores only without TDS

The text of section 194N is as under:

• Non-deduction of TDS does not make transaction as unexplained in the hands of deductee – ITAT
• Last date to submit MEF 2026-27 extended to 09.09.2026
• Validity of demand u/s 156 for default u/s 115-O, if assessment order u/s 143(3) has Nil demand
• Issue already examined and adjudicated by CIT(Appeals), can’t be reopened on same set of facts
• TDS can’t be denied for non deposit of tax deducted by the deductor – High Court

addition u/s 68 addition u/s 69A ca misconduct cash deposit in bank cbdt circular CBDT Instruction cbdt notification cbdt order cbdt press release cgst circular cgst notification cit revision 263 concealment penalty condonation of delay covid-19 custom circular demonetisation due date extension e-way bill faq GST circular GST Council Meeting gst faq gstn advisory GSTR-3B GST rates IBBI ibc icai announcement income tax penalty itat ITAT Delhi mca circular MCA notification penalty 271(1)(c) penalty u/s 271(1)(c) Press Release reasons recorded reopening 148 Reopening us 147 Search & Seizure sebi circular unexplained cash credits validity of notice u/s 148 Withdrawal of 2000 500 Bank Notes