TDS on cash withdrawal to discourage cash transactions

In order to further discourage cash transactions and move towards less cash economy, it is proposed to insert a new section 194N in the Act to provide for levy of TDS at the rate of two per cent on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from an account maintained by the recipient.

It is proposed to exempt payment made to certain recipients, such as the Government, banking company, cooperative society engaged in carrying on the business of banking, post office, banking correspondents and white label ATM operators, who are involved in the handling of substantial amounts of cash as a part of their business operation,  from the application of this provision. It is proposed to empower the Central Government to exempt other recipients, through a notification in the official Gazette in consultation with the Reserve Bank of India.

This amendment will take effect from 1st September, 2019.

[Clause 46]

 

 

 

TDS on cash withdrawals to apply when annual cash withdrawals exceed a threshold, with specified institutional exemptions. Section 194N creates a TDS obligation on cash payments from a recipient's account by banks, cooperative banks and post offices when annual aggregate cash withdrawals exceed a prescribed threshold, targeting reduction of cash transactions; specified institutional recipients are exempted, and the Central Government may notify further exemptions in consultation with the Reserve Bank of India, with a statutory commencement provision.