CBDT launched tool for banks, co-operative societies & post offices to ascertain TDS applicability rates on cash withdrawals

A new functionality of Income Tax Department namely “Verification of applicability u/s 194N” which is available on www.incometaxindiaefiling.gov.in since July 1, 2020 has now made accessible for banks, co-operative societies, and post offices through web-services by Central Board of Direct Taxes (CBDT). This feature will enable banks and post offices to ascertain the TDS (Tax deduction at source) applicability rates on cash withdrawals of above Rs 20 lakh in case of a non-filer of the income-tax return (ITR) and that of above Rs 1 crore in case of a filer of the ITR.

• Through this tool, the entire process of ascertaining the TDS is automated and will be linked to the bank’s internal core banking solution.

Amendment in Income Tax Act, 1961 w.e.f. July 1, 2020

As per Central Board of Direct Taxes (CBDT), there are cases when huge amount of cash is being withdrawn by persons who have never filed ITR. In order to ensure filing of return by these persons and to keep track on cash withdrawals by the non-filers, and to curb black money, the Finance Act, 2020 w.e.f. 1 July, 2020 further amended Income-tax Act, 1961 to deduct TDS 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 If the person withdrawing cash is a non-filer of the income-tax return, 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.

How will it ease the work for banks and post offices?

With the availability of “Verification of applicability u/s 194N” tool, now bank/co-operative society/post office has to enter only the Permanent Account N​umber (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 indicating the rate.

About Section 194N

In order to discourage cash transactions and move towards a cashless economy, the Finance (No.2) Act, 2019 has inserted section 194N in the Income Tax Act w.e.f. 1 September, 2019. This section was again amended by the Finance Act, 2020 by clause 83A of the Finance Bill, 2020.

About Central Board of Direct Taxes (CBDT):
CBDT, a part of the Department of Revenue in the Ministry of Finance works as the policy making body for the Income Tax department. 
Chairperson– Pramod Chandra Mody
Headquarter– New Delhi