TDS @ 2% is required to be deduced on Cash withdrawal exceeds Rs. 20 Lakhs but less than Rs. 1 crore during the previous year by a person from one or more of his bank or post office account, as the case may be, and the said person has not filed his Income Tax Returns for last three years . Further, the tax shall be required to be deducted only on the amount exceeding Rs. 20 Lakhs.

TDS @ 5% is required to be deduced on Cash withdrawal exceeds Rs. 1 Crore during the previous year and the said person has filed his Income Tax Returns of Previous year. Further, the tax shall be required to be deducted only on the amount exceeding Rs. 1 Crores.

 Amendment of Section 194N will be with effect from 01 July 2020 .

1) Who is required to deducted tax ?

 Ans : The person (payer) making the cash payment will have to deduct TDS under Section 194N. Here is the list of such persons:

• Any bank (private or public sector)
• A co-operative bank
• A post office

2) Section 194N applicability on taxpayers

Ans: The section will apply to withdrawals made by any taxpayer including:

• An Individual
• A Hindu Undivided Family (HUF)
• A Company
• A partnership firm or an LLP
• A local authority
• An Association of Person (AOPs) or Body of Individuals (BOIs)

3) Non Applicability of Section 194A

Ans: Section 194N  will not apply to withdrawals made by following taxpayers:-

• Government Body
• Bank including co-operative banks
• Business correspondent of a banking company
• White label ATM operator of any bank
• Farmers – Central Government specifies the commission agent or trader,operating under Agriculture Produce Market Committee (APMC)
• CBDT exempts cash withdrawal by the authorised dealer and its franchise agent and sub-agent; and Full-Fledged Money Changer (FFMC) licensed by the Reserve Bank of India and its franchise agent from TDS under Section 194N subject to conditions specified in Notification No. 80/2019-Income Tax dated 15th October, 201