The objective of introducing Section 194N by government in the Union Budget 2019 of July 2019 is to discourage cash transactions in the country and promote the digital transaction in India or promote less cash economy. ‘Section 194N –TDS on cash withdrawals over and above Rs 1 crore’ has been introduced through the Finance Bill, 2019.
To whom is 194N applicable?
Applicable to withdrawals made by below:
- An Individual
- A Hindu Undivided Family (HUF)
- A Company
- A partnership firm or an LLP
- A local authority
- An Association of Person (AOPs) or Body of Individuals (BOIS)
Who will deduct TDS?
Applicable The following payers will deduct TDS
- Any bank (private or public sector)
- A co-operative bank
- A post office
Who are exempted from 194N?
- Any government body
- Any bank including co-operative banks
- Any business correspondent of a banking company (including co-operative banks)
- Any white label ATM operator of any bank (including co-operative banks)
- Any other person notified by the government
Dates of applicability?
The threshold of Rs 1 crore is with respect to the previous year, calculation of the amount of cash withdrawal for triggering deduction under section 194N of the Finance Act shall be counted from April 1, 2019
The Central Board of Direct Taxes (CBDT) has further clarified that if a person has already withdrawn Rs 1 crore or more in cash up to August 31, 2019, in the current fiscal, the two percent TDS shall apply on all subsequent cash withdrawals.