TDS on Cash Withdrawal above ?1 Crore

The revenue department on 30August19 said the 2 % tax deduction at source (TDS) on cash withdrawals of over Rs 1 crore will come into effect from September 1. The Central Board of Direct Taxes (CBDT) further said that if a person has already withdrawn Rs 1 crore or more in cash up to August 31, 2019, in the current fiscal, the two per cent TDS shall apply on all subsequent cash withdrawals.

The government had made the provision of levying 2% TDS on cash withdrawals exceeding Rs 1 crore in the Union Budget with an aim to discourage cash transactions and move towards less cash economy.

Since the provision comes into effect only from 1 September, cash withdrawal prior to that will not be subjected to TDS, although it will be counted in computing the threshold for the whole year.

The government has been taking various steps to discourage use of cash and to promote digital payments to establish a trail of transactions in the economy and to check generation of unaccounted wealth. The 2% TDS is one such step.

The CBDT also said in a separate statement that it has set up a five member dedicated cell led by a CBDT member for addressing the specific tax problems faced by start-ups. The start-up cell will work towards redressal of grievances with respect to administration of the income tax law, said the statement.

However, since the threshold of Rs 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction under section 194N of the Finance Act shall be counted from April 1, 2019.

Hence, if a person has already withdrawn Rs 1 crore or more in cash up to August 31, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two per cent TDS would apply on all subsequent cash withdrawals.

In fact, after demonetisation in November 2016, there was speculation that Union Budget 2017 might reintroduce the tax again. But what then finance minister Arun Jaitley announced that year was a ban on cash transactions above Rs 2 lakh by inserting a new section, 269ST, in the Income Tax Act. According to this section, no person can receive an amount of Rs 2 lakh or more in cash

a) In aggregate from a person in a day; or

b) In respect of a single transaction; or

c) In respect of transactions relating to one event or occasion from a person.

If an individual receives more than Rs 2 lakh in cash, then he will have to pay a penalty as mentioned under section 271DA of the Income Tax Act. The amount of penalty he would have to pay would be equal to the amount he has received, i.e., 100 per cent.

Banking Cash Transaction Tax

Former finance minister, P. Chidambaram, had introduced a banking cash transaction tax in the 2005 budget. This was done with the objective of checking the source of money trail and to stop the growth of black money.

The tax was payable by individuals and Hindu Undivided Family (HUF) if they withdrew cash over Rs 50,000 on a single day from a bank account other than savings bank account. It was fixed at 0.1 per cent on cash withdrawals from bank. For entities other than individuals and HUF, tax was levied on withdrawal of Rs 1 lakh and above on a single day.

The tax was applicable even in case of money withdrawn from fixed deposits at the time of maturity, if the amount exceeded Rs 50,000 for individuals and HUFs and Rs 1 lakh for any other entity except for individuals and HUF. No tax was payable in case term deposit, on maturity, was credited into any bank account.

You can apply for an attractive offer with best possible Rate of Interest and Terms for Personal Loan, Business Loan , Home Loan and Car Refinance Loan.

FundsTiger is an Online Lending Marketplace where you can avail fast and easy Home, Business and Personal Loans via 40+ Banks and NBFCs at best possible rates. We will also help you to improve your Credit Score. We have dedicated Relationship Managers who assist you at every step of the process. We can also help you in Balance Transfers that will help you reduce your Interest Outgo.