Clarification in relation to the notification issued under clause (v) of the proviso to section 194N of the Income-tax Act, 1961 (the Act) prior to its amendment by Finance Act, 2020 (FA, 2020): CBDT vide Circular No. 14/2020 dated 20.07.2020 clarified that the Notifications so far issued under clause (v) of the proviso to section 194N as was introduced by the Finance (No. 2) Act, 2019 shall be read as Notifications issued under the fourth proviso to section 194N as amended by the Finance Act, 2020.
Readers are aware that the Finance (No. 2) Act, 2019 had introduced a new section imposing TDS on cash withdrawal under section 194N of the Income Tax Act, 1961. The main provision of section 194N had one proviso which provided the circumstances under which the provisions of section 194N will not apply. Clause (v) to the proviso to the then section 194N empowers the Central Government to notify persons or class of persons to whom the provisions of section 194N shall not apply.
Accordingly, in exercise of the said power, the Central Government has issued three notifications which are as under:
(a) Notification 68 of 2019 dated 18.09.2019: Cash Replenishment Agencies (CRAs) and franchise agents of White Label Automated Teller Machine Operators (WLATMOs) for the purpose of replenishing cash in ATMs operated by these entities subject to conditions mentioned in the said notification
(b) Notification 70 of 2019 dated 20.09.2019: Commission agent or trader operating under Agriculture Produce market Committee (APMC) and registered under any law relating to Agriculture Produce Market of the concerned State have been exempted subject to conditions specified in the said notification
(c) Notification 80 of 2019 dated 15.10.2019: The authorized 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 for the purposes of,-
(i) Purchase of foreign currency from foreign tourists or non-residents visiting India or from resident Indians on their return to India, in cash as per the directions or guidelines issued by Reserve bank of India; or
(ii) Disbursement of inward remittances to the recipient beneficiaries in India in cash under Money Transfer Service Scheme (MFSS) of the Reserve Bank of India;
and subject to the conditions specified in the said notification.
Section 194N on ‘TDS on Cash Withdrawals’ is completely rewritten by the Finance Act, 2020. It may be noted that the amendment in section 194N was not in the original Finance Bill, 2020 which was introduced in the Parliament (Lok Sabha) on February 1, 2020. It was only introduced as a government amendment in the Finance Bill, 2020. Clause 83A of the amended Finance Bill, 2020 substituted the section 194N as introduced by the Finance (No. 2) Act, 2019.
After the amendment in section 194N, it is to note that the clause (v) of the proviso to section 194N prior to its amendment has now become the fourth proviso to the said section.
The Circular states that the Board has received several representations seeking clarification regarding the validity of the notifications issued under erstwhile clause (v) of the proviso to section 194N in light of the amendments carried out by Finance Act, 2020.
The Board has now clarified that the three notifications so far issued under erstwhile clause (v) of the proviso to section 194N shall be deemed to be issued under the fourth proviso to section 194N as amended by the Finance Act, 2020. It is further reiterated that the exemption allowed under the said notifications shall be subject to the conditions laid down therein.
Read the full text of the Circular No. 14/2020 dated 20.07.2020 on clarifications on notifications issued under erstwhile Section 194N
Circular no. 14/2020
F. No. 370142/27/2020-TPL
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(TPL Division)
****
Room no. 147B-II, North Block,
New Delhi, dated 20th July, 2020
Subject: Clarification in relation to notification issued under clause (v) of proviso to section 194N of the Income-tax Act, 1961 (the Act) prior to its amendment by Finance Act, 2020 (FA, 2020)-Reg.
Section 194N of the Act as inserted by Finance (No.2) Act 2019 provided for deduction of tax at source on payment made by a banking company, a cooperative society engaged in the business of banking or post office, in cash to a recipient exceeding Rs. 1 crore in aggregate during a financial year from one or more account maintained by such recipient. Clause (v) of proviso to the said section had empowered the Central Government, in consultation with the Reserve Bank of India (RBI), to exempt by way of notification in Official Gazette, persons or class of persons so that payments made to such persons or class of persons shall not be subjected to TDS under this section. Accordingly, in exercise of the said power, Central Government has issued three notifications which are as under:
(a) Notification 68 of 2019 dated 18.09.2019: Cash Replenishment Agencies (CRAs) and franchise agents of White Label Automated Teller Machine Operators (WLATMOs) for the purpose of replenishing cash in ATMs operated by these entities subject to conditions mentioned in the said notification
(b) Notification 70 of 2019 dated 20.09.2019: Commission agent or trader operating under Agriculture Produce market Committee (APMC) and registered under any law relating to Agriculture Produce Market of the concerned State have been exempted subject to conditions specified in the said notification
(c) Notification 80 of 2019 dated 15.10.2019: The authorized 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 for the purposes of,-
(i) Purchase of foreign currency from foreign tourists or non-residents visiting India or from resident Indians on their return to India, in cash as per the directions or guidelines issued by Reserve bank of India; or
(ii) Disbursement of inward remittances to the recipient beneficiaries in India in cash under Money Transfer Service Scheme (MFSS) of the Reserve Bank of India;
and subject to the conditions specified in the said notification.
2. Section 194N of the Act was amended by the Finance Act, 2020 (the FA, 2020) in order to make the provisions of the said section more stringent for non ITR filers. It is to note that the clause (v) of the proviso to section 194N prior to its amendment has now become fourth proviso to the said section. Representations have been received seeking clarification regarding the validity of the above mentioned notifications in light of the amendments carried out by FA, 2020.
3. The matter has been examined by the Board and it is hereby clarified that the above mentioned three notifications shall be deemed to be issued under fourth proviso to section 194N as amended by the FA, 2020. It is further reiterated that the exemption allowed under the said notifications shall be subject to the conditions laid down therein.
Ankit Jain
Under Secretary (TPL)-III
Download CBDT Circular No. 14/2020 dated 20.07.2020 on clarifications on notifications issued under erstwhile Section 194N in pdf format.
Suggested Readings on Section 194N
Amended Section 194N-TDS on Cash Withdrawals from 2020-21
Changes proposed in Income-Tax by the Finance Bill 2019
Changes in TDS Rates and Provisions in Union Budget 2019
CBDT Notification for TDS Challan and TDS Return under 194M and 194N
Important aspects of TDS on Cash Withdrawal under Section 194N after Union Budget 2019
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. 74/2019 dt 27-09-2019 on Credit of TDS
Notification No. 80/2019 dt 15-10-2019 on Exemption from section 194N
Notification No. 98/2019 dt 18-11-2019 on Challan and Return
Online Tools for Section 194N
Online Tool to determine TDS rate u/s 194N launched
CBDT issues Press Note on online Tool for TDS on Cash Withdrawal under section 194N
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