I-T dept’s utility helps banks, post offices ascertain TDS rates on cash withdrawals
To discourage cash transactions, keep track of cash withdrawals by non-filers, increase tax compliance and curb black money, the government changed TDS rules for making cash withdrawals from banks and post offices from this month.Updated: Jul 12, 2020 20:37 IST
The Income Tax Department on Sunday notified facilitating a new functionality for banks and post offices to help them ascertain the applicability rates of Tax Deducted on Source (TDS) on cash withdrawal of above Rs 20 lakh in case of a person who hasn’t filed income tax return and that of above Rs 1 crore in case income tax return has been filed.
Under this facility, the bank or post office will now only have to enter the PAN of the person who is withdrawing cash for ascertaining the applicable rate of TDS. On entering PAN, a message will be instantly displayed on the departmental utility: “TDS is deductible at the rate of 2% if cash withdrawal exceeds Rs. 1 crore” [if the person withdrawing cash is a filer of the income-tax return] and “TDS is deductible at the rate 2% if cash withdrawal exceeds Rs. 20 lakh and at the rate of 5% if it exceeds Rs. 1 Crore” [if the person withdrawing cash is a non-filer of the income-tax return]”, according to the notification issued by Central Board of Direct Taxes (CBDT).
CBDT said that this functionality available as “Verification of applicability u/s 194N” on the income tax department website www.incometaxindiaefiling.gov.in since 1st July 2020, is also available to the banks through web-services so that the entire process can be automated and be linked to the bank’s internal core banking solution.
Data on cash withdrawal has shown that large amounts of cash is being withdrawn by people who have never filed income tax returns. Therefore, to discourage cash transactions, keep track of cash withdrawals by non-filers, increase tax compliance and curb black money, the government changed TDS rules for making cash withdrawals from banks and post offices from this month.
As per the amended Income Tax Act, which came into effect from July 1, 2020, the threshold of cash withdrawal has been further lowered to Rs 20 lakh for the applicability of this TDS for the non-filers and also mandated TDS at the higher rate of 5% on cash withdrawal exceeding Rs. 1 crore by the non-filers.
The CBDT note said that so far, more than 53,000 verification requests have been executed successfully on the new facility provided to banks and post offices by the income tax department.