TDS levy on cash withdrawal of over Rs 20 lakh from bank account if you haven't done this
If an individual has not filed income tax return for the last three financial years, then cash withdrawal from his or her savings or current bank account will attract TDS if the total amount withdrawn in a financial year exceeds Rs 20 lakh.
This is because Budget 2020 had amended the scope of section 194-N of the Income-tax Act, 1961. As per the amended law, if an individual withdraws cash exceeding Rs 20 lakh in an FY from his/her bank account (current or savings) and has not filed ITR during the last three financial years then TDS will be leviable at the rate of 2 per cent on the amount of cash withdrawn. Further, if the amount of cash withdrawn exceeds Rs 1 crore in the financial year, then TDS at the rate of 5 per cent will be applicable on the amount of cash withdrawn in case of the individual who has not filed ITR in the last 3 financial years.
The new law on TDS on cash withdrawal has come into effect from July 1, 2020.
Additionally, TDS of 2% on cash withdrawal is applicable if the amount withdrawn from a bank account exceeds Rs 1 crore in a financial year even if individual has filed ITR. Had the individual not filed his/her ITR for the last three financial years, then TDS at the rate of 5 per cent on the amount withdrawn exceeding Rs 1 crore would have been levied. This law had been introduced by the government in Budget 2019. The law was aimed at discouraging cash transactions and promoting digital transactions.
For instance, assume you withdraw Rs 25 lakh cash from your savings account in the FY 2020-21. However, ITR has not been filed by you for any of the three preceding financial years i.e. FY 2019-20, FY2018-19 and FY 2017-18. In such a case, bank will deduct TDS at the rate of 2 per cent on Rs 25 lakh i.e. Rs 50,000 from the amount of cash withdrawn.
Chartered Accountant Naveen Wadhwa, DGM, Taxman.com says, The scope of Section 194N was substantially enhanced by the Finance Act, 2020. Earlier only single TDS rate and single threshold limit was prescribed for deducting tax on cash withdrawal. Now, a banking co., or a co-op. bank or a post office is required to deduct tax at two different rates considering two different threshold limits. This situation arises when a person withdrawing cash falls under the first proviso to Section 194N. The general provisions of section 194N require deduction of tax at the rate of 2% if cash withdrawal exceeds Rs. 1 crore. First proviso to Section 194N provides that if person withdrawing cash has not filed return of income for three previous years, tax shall be deducted at the rate of 2% on cash withdrawal exceeding Rs. 20 lakhs and 5% on cash withdrawal exceeding Rs. 1 crore.
