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Important Notification on Tax Deducted at Source (TDS) for cash withdrawal

Dear Customer

Under the Income Tax Act, 1961 with respect to Tax Deducted at Source [TDS] against cash withdrawals, the changes applicable with effect from 1 July 2020 are stated here under:

Changes applicable with effect from 1st July 2020:

If Income Tax returns are not filed for the preceding 3 Financial Years, for which the time limit for filing return under section 139(1) has expired, then rates of TDS under section 194N of the Income Tax Act, 1961 would be as follows:

  • TDS at 2 % on aggregate cash withdrawal exceeding INR 20 Lakh to 1 Crore, and
  • TDS at 5 % on aggregate cash withdrawal exceeding INR 1 Crore.

In all other cases, TDS at 2% would continue as mentioned above. However, in the absence of a valid Permanent Account Number [PAN] issued by the Income Tax Department, applicable TDS rate will be at 20%.

Cash withdrawals from 1 April, 2020 onwards would be considered for calculating the cumulative cash withdrawal for the purpose of TDS.

Below is the list of persons/ entities who are exempted from TDS on cash withdrawal:

  1. Government;
  2. Banking company or co-operative society engaged in carrying on the business of banking or a post office;
  3. Business correspondent of a banking company or co-operative society engaged in carrying on the business of banking;
  4. Any white label automated teller machine operator of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the authorization issued by the Reserve Bank of India;
  5. Such other person(s) as the Central Government may notify.