Know the Tax on Cash Withdrawals from Bank Accounts

Amendment has  been made to Sec 194N of  Income Tax Act relating to TDS applicable for cash withdrawals in your  bank account/s from 01-07-2020, as  per notification by CBDT. 

It is made clear that the higher rate of TDS will be applicable on cash withdrawal if ITR is not updated in the bank account. 

In order to save the Cash Withdrawal Tax, customers are requested to submit copy of  ITR returns for the last three years with your branch before 30/06/2020, otherwise TDS will be deducted as per amendment.

After introducing new TDS (tax deducted at source) rates for high-value cash withdrawals from banks, the income tax department has now amended TDS rules further to tighten the noose and seek more disclosures in the ITR Forms. 

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With effect from July 1 this year, the I-T department has amended TDS rules and linked it with filing of income tax return (ITR) for those withdrawing high-value cash from banks, co-operative institutions and post offices. 

For those who have been filing ITR regularly for the last three years, there is no TDS for cash withdrawals of upto ₹1 crore and 2% for above ₹1 crore.

But if you have failed to file ITR for the last three years, you have to pay a TDS of 2% on cash withdrawal in excess of ₹20 lakhs to ₹1 crore. The rate goes up to 5% if the amount is above ₹1 crore. However, if your tax liability is zero you can file ITR to claim tax refund later on.

In its latest notification, the Central Board of Direct Taxes (CBDT) has amended TDS forms to give effect to the new withholding provisions under Finance Act, 2020. 

You can also check the TDS on Cash Withdrawal through Income tax tools : Here

The amendment in Rule 31A makes it mandatory to "furnish particulars of amount paid or credited on which tax was not deducted or deducted at lower rate in view of the notification issued under second proviso to section 194N or in view of the exemption provided in third proviso to section 194N or in view of the notification issued under fourth proviso to section 194N".

The income tax department has revised format of Form 26Q and 27Q, where details of TDS deducted and deposited on various resident and non-resident payments is required to be deposited.