TDS on Cash Withdrawals
Introduction
Banks, co-operative banks, and post offices must deduct TDS under section 194N on cash withdrawals exceeding specified limits from accounts maintained by the recipient. The TDS rate is 2% or 5%, as applicable.
Key Provisions
- Deductor:Any bank, co-operative bank, or post office making cash payments above the threshold limit.
- Deductee:Applies to all recipients, whether resident or non-resident.
- Time of Deduction: At the time of payment of the cash withdrawal.
Rate of TDS and Threshold Limits
|
Category |
Threshold |
TDS Rate |
|
If the return of income is filed |
Exceeds Rs. 1 crore (Rs. 3 crore for co-operative societies) |
2% |
|
If the return of income is NOT filed for the 3 preceding years |
Exceeds Rs. 20 lakh but up to Rs. 1 crore (Rs. 3 crore for co-operative societies) |
2% |
|
Exceeds Rs. 1 crore (Rs. 3 crore for co-operative societies) |
5% |
- If PAN is not provided, TDS is deducted at 20% underSection 206AA.
- For non-residents and foreign companies, surcharge and cess apply to TDS.
Exemptions from TDS
- Payments to the Government, banks, co-operative banks, and post offices.
- Business correspondents and white-label ATM operators under RBI guidelines.
- Specified entities notified by the Central Government, including:
o ATM cash replenishment agencies subject to the fulfilment of specified conditions. [Notification No. 68/2019, Dated 18-9-2019]
o Agricultural Produce Market Committee (APMC) agents and traders, subject to the fulfilment of specified conditions. [Notification No. 70/2019, Dated 20-9-2019]
o Authorised dealers and Full-Fledged Money changers, subject to the fulfilment of specified conditions. [Notification No. 80/2019, Dated 15-10-2019]
o Foreign diplomatic missions, UN agencies, and consulates. [Notification No. 123/2024, Dated 28-11-2024]
Compliance Requirements
- Lower/Nil Deduction Certificate:Not available under Section 197.
- Deposit of TDS:
o Challan ITNS 281 within 7 days from the end of the deduction month.
o For March deductions, deposit by 30th April.
o Government offices depositing TDS without a challan must deposit the TDS on the same day on which the tax was deducted.
- TDS Statement Filing:Quarterly submission in Form 26Q.
- TDS Certificate:Form 16A must be issued within 15 days from the due date of TDS statement filing.
Consequences of Non-Compliance
- Failure to Deduct or Deposit TDS:
o Interest liability under Section 201.
o Penalty under Section 271C (up to the non-deducted amount).
o Prosecution under Section 276B.
- Failure to Furnish TDS Statement:
o Rs. 200 per day penalty under Section 234E (limited to TDS amount).
o Additional penalties under Sections 271H and 272A.
- Failure to Issue TDS Certificate:Penalty under Section 272A.