Amendment to section 194N by Finance Bill Passed in Loksabha on 23.03.2020

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Earlier Section 194N was intended to deduct TDS on cash withdrawal by any person during a year above Rs. 1 crore @2%. No amendment was proposed while presenting the original budget for 2020, however now while presenting the same in Lok Sabha amendment was made in section 194N wherein a new proviso was added stating:

“Provided that in case of a recipient who has not filed the returns of income for all of the three assessment years relevant to the three previous years, for which the time limit of file return of income under sub-section (1) of section 139 has expired, immediately preceding the previous year in which the payment of the sum is made to him, the provision of this section shall apply with the modification that

the sum shall be the amount or the aggregate of amounts, as the case may be, in cash exceeding twenty lakh rupees during the previous year; and

the deduction shall be:

an amount equal to two per cent. of the sum where the amount or aggregate of amounts, as the case may be, being paid in cash exceeds twenty lakh rupees during the previous year but does not exceed one crore rupees; or

an amount equal to five per cent. of the sum where the amount or aggregate of amounts, as the case may be, being paid in cash exceeds one crore rupees during the previous year:”

Thus, now if an a person who has account with bank and he has not filed return of income for “all” 3 preceding year and whose time limit has expired u/s 139(1) the limit of withdrawal for them would be Rs. 20 lakh and TDS rate for withdrawal would be 2% if withdrawal between 20 lakh to 1 crore and after 1 crore it shall be 5%.

This amendment shall be applicable from 01.07.2020

Thus for F.Y. 2020-21, one will have to check ITR for 2016-17 to 2018-19 and if any one of the ITR has been filed this proviso shall not be applicable and limit would be Rs. 1 crore.

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