TDS on Cash Withdrawal w.e.f. 1 July 2020

Finance Act, 2020 tightened the existing provisions U/S 194N for those who have not been filing income tax returns. This will be applicable from July 1, 2020.

To discourage cash transactions in the country and promote digital economy, the government, in July 2019, introduced Section 194N in the Income Tax Act, 1961 for tax deducted at source (TDS) at the rate of 2 per cent on cash withdrawals over and above ₹1 crore.

The Finance Act, 2020 tightened it by lowering the threshold of ₹1 crore to ₹20 lakh for those who have not filed their income tax returns (ITRs) for the past three years. Further, the rate of TDS has also been increased to 5 per cent for these taxpayers for withdrawal exceeding ₹1 crore.