CBDT’S New Tool for Banks Post Offices to Deduct Tax on Heavy Cash Withdrawals (Download PDF)

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CBDT՚s New Tool for Banks Post Offices to Deduct Tax on Heavy Cash Withdrawals

  • To ensure tax deduction at source (TDS) on cash withdrawals beyond a certain threshold, the Income-Tax Department announced a new tool for banks and post offices.
  • Any non-filer of Income-Tax return is subject to TDS if he/she withdraws ₹ 20 lakh or more in a financial year.
  • The rate of TDS would be 2 percent.

Overview

  • If the withdrawal is more than ₹ 1 crore, the rate will go up to 5 percent.
  • The system will come into effect from July 1,2020.
  • From September 1,2019, a system was introduced to levy TDS at the rate of 2 percent for any individual who has filed returns and withdraws cash of ₹ 1 crore or more from a bank or post office.
  • A new functionality for banks and post offices will help them ascertain the TDS applicability rates on cash withdrawal of above ₹ 20 lakh in case of a non-filer of income-tax returns and that of above ₹ 1 crore in case of a filer of income tax returns.
  • So far, around 53,000 verification requests have been executed successfully on this facility.
  • CBDT said that now the bank/post office has to only enter the PAN of the person who is withdrawing cash for ascertaining the applicable rate of TDS.
  • On entering PAN, a message will be displayed on the departmental utility.
  • CBDT said that the data on cash withdrawal indicated a huge amount of cash being withdrawn by persons who have never filed income-tax returns.
  • To ensure filing of returns by these persons and to keep track on cash withdrawals by non-filers and to curb black money, the Finance Act, 2020, further amended Income Tax Act to lower threshold of cash withdrawal to ₹ 20 lakh for the applicability of this TDS for the non-filers, and also mandated TDS at the higher rate of on cash withdrawals exceeding ₹ 1 crore by non-filers.

- Published/Last Modified on: September 10, 2020

Policy/Governance, Economy

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