In a bid to curb cash transactions and bolster tax compliance, the Tax Department has ushered in revised TDS rules.
Effective from July 1, the new TDS regulations pertain to cash withdrawals from banks and post offices, significantly altering the tax landscape for high-value transactions.
TDS on Cash Withdrawals Over Rs 20 Lakh: New Parameters
For individuals conducting high-value cash transactions exceeding Rs 20 lakh in a financial year, the TDS rate is now contingent on whether they have filed Income Tax Returns (ITR) in the past three years.
TDS Rules for Recent ITR Filers
The introduction of Section 194N in the 2019 budget stipulated a 2 percent TDS for cash withdrawals exceeding Rs 1 crore from bank accounts. This rule extends to post office account withdrawals as well.
In a scenario where someone withdraws Rs 99 lakh in cash during a financial year and subsequently withdraws an additional Rs 1.50 lakh, only Rs 50,000 would be subject to a 2 percent TDS.
Special Considerations for PAN Card Updates
Individuals with outdated PAN card information in their bank records could face a hefty TDS charge of up to 20 percent under Section 206AA of the Income Tax Act.
Exemption for Recent ITR Filers
If you have filed an income tax return within the last three years and have a valid PAN card, cash withdrawals under Rs 1 crore will not incur any TDS.
Banks may request your ITR-V or cross-check via the Income Tax Department’s e-filing portal to confirm your return filing status.
TDS Rules for Non-ITR Filers
Those who have not filed an income tax return in the past three years face varying TDS rates:
No TDS on cash withdrawals up to Rs 20 lakh.
2 percent TDS for withdrawals between Rs 20 lakh and Rs 1 crore.
5 percent TDS for cash withdrawals exceeding Rs 1 crore.
These revised TDS rules are designed to encourage tax compliance and discourage excessive cash transactions in the financial landscape.
