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Online Tool to determine TDS rate u/s 194N launched


Online Tool to determine TDS rate u/s 194N launched: Income tax department has introduced functionality to determine TDS rate u/s 194N and the same has been enabled on e-Filing portal for Banks, Co-operative societies and Post offices.

This will ensure the applicability of correct rate of TDS on large cash withdrawals from Banks and Post offices which has been made more complex by an amendment by the Finance Act, 2020.

The Finance Act, 2020 has amended the provisions of section 194N to provide for different threshold amounts and rate of TDS for non-filers of income tax return compared to those who are regular return filers. Therefore, the rate of TDS and the threshold amount is linked to the filing of return.

This has made the task of the banks more complex to judge the applicability of different TDS rates for each and every assessee particularly with reference to the verification of return filing.

This online tool will definitely reduce the burden of the banks from the hilarious tasks of verifying the return filing status.

This tool is provided on the home page of the e-filing portal on the left hand side menu bar titled ‘Quick Links’. It can be directly accessed from here.

The deductor has to submit the PAN and the mobile number and accept the declaration on the landing page.

The salient features of section 194N are listed below-

1. Two categories of persons: Section 194N was introduced by the Finance Act, 2019. The existing provisions will continue to apply i.e. TDS of 2 per cent on cash withdrawal of Rs. 1 crore or more in a financial year. In addition, it is provided that in case of a person who has not filed his income tax return for last three assessment years and the time limit to file the return of income u/s 139(1) is expired, then the threshold limit of Rs. 1 crore is reduced to Rs. 20 Lakh and rate of TDS shall be-

(a) 2 per cent from Rs. 20 Lakh to Rs. 1 crore, and

(b) 5 per cent above Rs. 1 crore.

In other cases, the threshold limit of Rs. 1 crore and the rate of TDS shall be 2 per cent above Rs.  crore cash withdrawal shall continue.

2. Cash Withdrawal Accounts: This section shall apply in case of cash withdrawal from a bank account including a cooperative bank and from an account held with the Post Office.

3. Bank-wise threshold limit: The limit of Rs. 1 crore shall apply bank-wise and not branch-wise. This is possible now due to core banking solutions implemented by banks.

4. Aggregate from all accounts: It shall apply if the aggregate amount of cash withdrawal in a financial year exceeds Rs. 1 crore from one or more bank accounts. In other words, the aggregate of cash withdrawal from the savings account, current account, cash credit account, overdraft account, etc. of the same person shall be aggregated to determine the threshold limit of Rs. 1 crore or Rs. 20 lakh, as the case may be.

5. TDS shall apply on excess cash withdrawal: If the cash withdrawal amount in a year exceeds Rs. 1 crore or Rs. 20 Lakh then TDS will apply on the excess amount of cash withdrawal over Rs. 1 crore or Rs. 20 Lakh, as the case may be, and not on the entire amount of cash withdrawal.

6. Exclusions: It is applicable to all the account holders be it individual, HUF, company, etc. except government, banks, white label ATM operators, etc. who withdraws cash in excess of Rs. 1 crore in a year even if they file return of income or not.

7. The rate of TDS for cash withdrawal is 2% and 5 per cent in certain non-filers cases.

8. The purpose of cash withdrawal, whether for business or personal, is irrelevant.

The new amended provisions have come into effect from 1st July, 2017.

Determination of last three assessment years

If cash is withdrawn on 7th July 2020, the relevant three years would be-

Previous Year
Assessment Year
Return filing status
Applicable for Sec. 194N
Current previous year hence ignored.
Time limit or due date u/s 139(1) extended to 30th Nov. 2020 for all assessees vide CBDT Notification No. 35/2020 dated 24.06.2020.
Time limit to file the return u/s 139(1) expired. However, time limit to file the belated return and revised return for AY 2020-21 is extended from March 31, 2020 to July 31, 2020 vide CBDT Notification No. 35/2020 dated 24.06.2020.

Due Date specified as July 31, 2019 was extended to 31st August 2019.

Due Date specified as Sep 30, 2019 was extended to 31st Oct. 2019.
(1st Year)
Time limit u/s 139(1) as well as 139(4) expired
(2nd Year)
Time limit u/s 139(1) as well as 139(4) expired
(3rd Year)

Since AY 2021-22 (FY 2020-21) is the current previous year in which cash is withdrawn, the same is out of the purview of section 194N.

The due date for AY 2020-21 (FY 2019-20) is still not expired. Hence cannot be considered for section 194N.

Regarding AYs 2017-18, 2018-19, and 2019-20, the due dates specified in section 139(1) have expired and hence can be only considered for the purpose of Section 194N. However, with respect to AY 2019-20, one can still be able to file a belated return till July 31, 2020.

This tool is expected to help the banks in deciding all these factors related to return filing and determination of the correct applicable TDS rate under section 194N on the cash withdrawals.

Suggested Readings on Section 194N

CBDT Notifications issued so far under section 194N
Notification No. 68/2019 dt 18-09-2019 on Exemption from section 194N
Notification No. 70/2019 dt 20-09-2019 on Exemption from section 194N
Notification No. 80/2019 dt 15-10-2019 on Exemption from section 194N

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