Cash withdrawals in India may now attract TDS
The Finance Act 2019 introduced a new Section 194N in the Income Tax Act whereby cash withdrawals from Banks and Post Offices by any person in excess of Rs 1 crore in a year was liable to deduction of tax at source (TDS) @ 2%.
The Section had been amended by Finance Act 2020 to further provide that in case of persons who have not filed IT Returns in all the 3 years preceding the year in which amount is withdrawn by him, TDS shall be deducted:
• @ 2% where amount withdrawn exceeds Rs 20 lakhs but less than Rs 1 crore;
• @ 5% where amount withdrawn exceeds Rs 1 crore.
Hence, TDS will be attracted from Rs 20 lakhs in case of persons who have not filed IT returns in previous years and from Rs 1 crore for others. These provisions have now come into force with effect from 01 July 2020 and is applicable to every person including non-residents. Even withdrawals from ATM would be covered under the ambit of “cash withdrawal”. Since this limitation does not include bank transfers, it would be a better practice to manage transactions in India through digital mode.