TaxTMI 
TaxTMI 
Clause 393(3)[Table: S.No. 5] & Clause 393(4)[Table: S.No. 18] of Income Tax Bill, 2025 Vs. Section 194N of Income-tax Act, 1961
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....mechanics, practical implications, and comparative nuances between the two regimes. Objective and Purpose The core objective of both Section 194N and the corresponding provisions in the Income Tax Bill, 2025 is to curb large cash withdrawals, thereby promoting a less-cash economy, increasing traceability of funds, and deterring the movement of unaccounted money. The legislative intent is to discourage cash transactions in favor of digital payments, in line with the government's broader policy objectives of financial transparency, anti-money laundering, and widening the tax base. The rationale is that large cash withdrawals, particularly where the source or end-use is opaque, are often associated with tax evasion, money laundering, and parallel economy activities. By imposing a TDS obligation on such withdrawals, the law seeks to create a reporting trail and a financial disincentive for excessive cash usage, while also bringing such transactions under the tax authorities' surveillance. Detailed Analysis Clause 393(3)[Table: S.No. 5] of Income Tax Bill, 2025 Text Extract: "Any sum, paid in cash, from one or more accounts maintained by the deductee. Every perso....
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....d) any white label automated teller machine operator of a banking company or co-operative society engaged in carrying on the business of banking, as per the authorisation issued by the Reserve Bank of India under the Payment and Settlement Systems Act, 2007." Key Features: * Exempted Recipients: TDS under Clause 393(3)[Table: S.No. 5] is not to be deducted if the cash payment is made to: * The Government * Any bank, co-operative society engaged in banking, or post office * Business correspondents of such banks or societies, as per RBI guidelines * White label ATM operators, as authorized by RBI * Policy Rationale: These exemptions are designed to ensure that TDS provisions do not disrupt the functioning of the banking system, government operations, or intermediaries facilitating last-mile banking services and ATM operations. Interpretation and Issues: * The list of exempted entities closely mirrors the exemptions u/s 194N, maintaining continuity in policy and operational clarity. * The reference to RBI guidelines and authorizations ensures that only regulated entities benefit from the exemption, minimizing misuse. * The provision does not refer to the possibilit....
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....e extracted Clause 393(3) does not mention this, which may represent a substantive omission or may be addressed elsewhere in the Bill. * Legislative Structure: Clause 393 consolidates all TDS provisions under a single umbrella, using tables for various payments, while Section 194N is a standalone section. This may aid in legislative clarity and ease of reference, but could also create challenges in cross-referencing and interpretation. * Central Government Notification Power: Section 194N empowers the Central Government to notify further exemptions or reduced rates in consultation with RBI. Clause 393(3) does not mention such power in the extracted text. * Language and Format: The 2025 Bill uses a more tabular and itemized approach, which may improve clarity but could also lead to interpretational challenges if not cross-referenced properly. Comparative Table Aspect Clause 393(3)[Table: S.No. 5] & Clause 393(4)[Table: S.No. 18] of Income Tax Bill, 2025 Section 194N of the Income-tax Act, 1961 Applicability Cash withdrawals from banks, co-operative banks, or post offices by any person, subject to threshold. Same. Threshold Rs. 1 crore for most; Rs. 3 crore for....
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....activities. * Overlap with Other TDS Provisions: The unified structure of Clause 393 may create overlaps or conflicts with other TDS provisions, especially where cash withdrawals are linked to other taxable transactions. The Bill provides for precedence rules in certain cases, but operational clarity is essential. * Central Government Notification Powers: Section 194N specifically empowers the Central Government to notify further exemptions or reduced rates. The extracted clause does not mention this, which could restrict administrative flexibility unless provided elsewhere. Practical Implications For Banks, Co-operative Societies, and Post Offices * Obligation to monitor all cash withdrawals by each account holder during the tax year, aggregate them, and apply TDS once the threshold is breached. * Need for robust IT systems to track withdrawals across multiple accounts and branches. * Requirement to comply with TDS return filing and reporting obligations. * Potential for disputes where withdrawals are close to the threshold or where aggregation is disputed. For Recipients (Account Holders) * Cash withdrawals above the threshold will be subject to TDS, reducing the....