Did you know that an excess amount of cash withdrawal from a bank or post office can lead to deduction of TDS? This deduction kicks in when the sum withdrawn is higher than the permitted threshold.
This provision is enshrined under section 194N of the Income Tax (I-T) Act, 1961.
The TDS (tax deducted at source) is deducted when a sum or aggregate of sum withdrawn in cash by a person in a particular financial year crossed ₹1 crore. This limit is cut down to ₹20 lakh when account holder did not file an ITR for any of the past three years.
Who deducts the TDS?
TDS is deducted by banks (private, public and cooperative) or post offices.
The tax is deducted when making any cash payment to any person in excess of ₹20 lakh or ₹one crore (as the case may be) from his/her account maintained with such banks or post offices.
However, this tax is not applicable to everyone since there are certain exceptions. These include central or state government, private or public sector bank, any cooperative bank, post office, business correspondent of any bank, white label ATM operator of any bank, commission agents or traders operating under APMC for making payment to the farmers, authorised dealers and its franchise agent and sub-agent and full-fledged money changer licensed by RBI and any other person notified by the government notified in consultation with RBI.
Rate of TDS
The rate of TDS will be two percent on cash withdrawals above ₹one crore. This limit is cut down to ₹20 lakh if the taxpayer has not filed the income tax (I-T) return in the past three years.
To be able to check the limit for an individual, one can visit the income tax department’s website.
At the outset, you have to visit the income tax department’s official website.
On the portal, one has to click the link ‘TDS on cash withdrawal’ given on the left-hand side under the slug: Quick Links.
Then a new window will open wherein the system will ask you to enter PAN details and mobile number.
The next web page will then open where the system will prompt you to enter the one-time password (OTP).
After entering the OTP, another window opens that shows the rate of interest you are supposed to pay at the time of withdrawal.
If you have been filing income tax returns in the past three years, the TDS rate to be indicated will be 2 percent on withdrawals above ₹one crore. Otherwise, this limit will be ₹20 lakh only.
