In the Union Budget 2019, Finance Minister has introduced a new Section 194N i.e. TDS on Cash Withdrawal in order to discourage cash transactions in the country and to promote the digital economy.
What is Section 194N?
TDS on Cash Withdrawal u/s Section 194N of the Income tax act is applicable when the aggregate amount of cash withdrawals is more than Rs 1 crore during a financial year. This section will apply to all the sums of money or an aggregate of sums withdrawn from a particular bank in a financial year.
Who shall deduct TDS on Cash Withdrawal?
The following payers shall deduct TDS under this section:
- Any bank (private or public sector)
- A co-operative bank
- A post office
The provisions under section 194N are not applicable in case payment to the following person:
- Central or State Government Banking Company
- Co-operative Banks
- Business correspondents authorized by RBI
- White-label ATM operators
- Any other person notified by the government
Rate of TDS u/s 194N
The rate of TDS on cash withdrawal u/s 194N is 2% on the amount exceeding Rs. 1 crore. TDS will be deducted when the payment would be made by the Bank, Co-operative society, or Post Office i.e. TDS will be deducted at the time of making the payment. The limit of Rs 1 crore in a financial year is with respect to per bank or post office account and not a taxpayer’s individual account.
For example, If cash withdrawn by Mr. Arjun is Rs. 1cr then in that case TDS will not be deducted. Since the amount does not exceed Rs 1cr.
EXAMPLE
XYZ ltd has made the following cash withdrawals for FY 2021-22
- 85 Lakhs on 25th August 2021
- 30 Lakhs on 10th September 2021
There will be two separate calculations:
- The threshold limit of Rs. 1 crore
Aggregate cash withdrawal in a financial year
85 lakhs + 30 lakhs = 1.15 crore
Therefore Section 194N will be applicable in this case.
2. Calculation of TDS
The tax deduction would be made for any cash withdrawal exceeding 1 crore.
| Transactions | Amount (Rs.) |
| Cash Withdrawal on 25th August | 85 Lakhs |
| Cash Withdrawal on 10th September | 30 Lakhs |
| Total Cash withdrawal in FY 2021-22 | 1.15 crore |
| Less: Threshold Limit of 1 crore | (1 crore) |
| Amount eligible for TDS u/s 194N | 0.15 crore |
| TDS @ 2% | 30,000 |
TDS Certificate
Deductors of tax shall quarterly issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. The Deductor can download Form 16A from the account on TRACES. Using Form 16A, the deductee can claim credit of the TDS while filing Income Tax Return.
TDS Return
The Deductor liable to deduct tax under section 194N of the Income Tax Act shall file quarterly return in Form 26Q. The deductor, after filing the Form, should provide Form 16A to the deductee.
FAQs
The limit of Rs. 1cr is the overall limit for all accounts (like saving A/c, current A/c, etc) maintained by a person with one bank. The limit is per bank rather than per account.
Form 26AS is a statement for such income on which tax is deducted and deposited to the government by the deductor. However, cash withdrawal cannot be considered as income. Therefore, the government has simultaneously amended section 198 of the Income Tax Act wherein it is clarified that cash withdrawal shall not be deemed to be the income of the person.
However, to claim credit for the taxes deducted under Section 194N, assessees must file their income tax returns in Forms ITR 2 or 3 only. The assessee can not claim credit of TDS under section 194N in ITR 1.
Hey @Dia_malhotra
As per section 194A, TDS on interest other than interest on securities is required to be deducted by any person other than Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess or SHEC shall be added to the above rate.
Hope this helps!
Hey @HarishMehta
TDS u/s 194J needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any which is in excess of INR 30,000 as:
Hope this helps!
Hello @the_AK,
Against gross income, you can claim business expenses that you have incurred for earning that income. So you can claim this service fee as a business expense from the gross income received by you.
Hope this helps!
Hey @Bharti_Vasvani can you please help here?
Hello @Anuj_Agarwal,
TDS will be deducted by the company when the interest is actually paid on the securities, so at that time whoever is the owner of such security shall receive the interest and can claim credit of interest.
Hope this helps!
Hey @Anuj_Agarwal,
You can check out this article for more clarity:
Hope this helps!
I have respectable salary income and 1000 insurance commission…ie old commission…not claiming any expenses…can i show it as other income in itr1 or have to file itr 3
Hi @Shivam_B
If you have income from salary and income from insurance commission (business income), then you will be required to file ITR 3.
Itr 3 is so big…have to pay heavy charges…for filing…will it be defective if i do so ie reporting 1000 as other income in itr1 along with salary income…have closed down the insirance work since yesrs…i even contacted commssiom giving broker and closed my commission account…still they are showing in 26as wheress i am not receiving in real
Hi @Shivam_B
As per the recent utilities, ITD gives you the option to select only the schedules applicable to you while filing ITR.
Thus, you are not required to go through the entire ITR 3 form. You can also prepare and file ITR on Quicko, where you can upload form 16 and add commission income under the head “Business & Profession” and file ITR 3, without any charges as Quicko is a DIY platform helping individuals to file taxes.