TDS stands for tax deducted at source. As per the Income Tax Act, 1961( IT Act, 1961) TDS is an indirect way of collecting tax which combines the twin concept of “pay as you earn” and “collect as it is being earned” The concept of TDS was introduced with the aim to collect tax from the very source of income.
Withdrawing cash and not filing ITR?
Section 194N of the IT Act, 1961 for TDS on cash withdrawal was introduced by Finance Minister in the Union Budget 2019 for withdrawals exceeding 1 crore at the rate of 2% to discourage cash payments. The different provisions of Section 194N are discussed further.
The scope of Section 194N(IT Act, 1961) has been amended by Union Budget 2020. Earlier only a single TDS rate and single threshold limit were prescribed for deducting tax on cash withdrawal. The following changes have been made-
- If the withdrawer has not filed his income tax return for three financial years and withdrawal during the year exceeds Rs. 20 lakhs- TDS at the rate of 2% shall be deducted. However, if the amount of withdrawal exceeds Rs. 1 crore- TDS at the rate of 5% shall be deducted.
- If the withdrawer has filed his income tax return for the given year- No TDS deduction is applicable. However, if the amount of withdrawal exceeds Rs. 1 crore- 2% of TDS on the amount above 1 crore shall be deducted.
However, the tax so deducted on cash withdrawal can be claimed as a credit at the time of filing of ITR.
Who is required to deduct tax?
The person making cash payment is required to deduct TDS under Section 194N. Following is the list of such persons-
- every banking company,
- cooperative bank or
- post office
to deduct tax cash withdrawals by any person from his account maintained with such a bank or post office. To make this process simplified, CBDT has introduced an e-filing platform which enables the banking company or cooperative bank or post office to know whether the person withdrawing cash within the limits or not.
DUE DATE FOR FILING TDS RETURN: FY 2020-21
Every assessee whose TDS has become deducted will have to file his/her return in accordance with the following due dates-
|QUARTER||QUARTER||QUARTER ENDING||DUE DATE|
|1st Quarter||April-June||30 June 2020||31st March 2021|
|2nd Quarter||July-September||30 September 2020||31st March 2021|
|3rd Quarter||October-December||31st December 2020||31st January 2021|
|4th Quarter||January-March||31st January 2021||31st May 2021|
The Government introduced the above section in order to discourage cash transactions in the country and promoting digital transactions. This will also be beneficial in eliminating black money from the country.
The above amendment is applicable with effect from July 1, 2020.
The section will apply to withdrawals made by taxpayers who are 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).
The following persons/ entities are exempted from TDS on cash withdrawal:
- A banking company or cooperative society engaged in carrying on the business of banking or a post office.
- Business correspondent of a banking company or cooperative society engaged in carrying business of banking.
- White label ATM operator of any bank.
- Any other person the CG may specify.
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