The Department of Revenue notified that 2% tax deduction at source (TDS) on cash withdrawals of over Rs 1 crore will come into effect from September 1, 2019. The government had made this provision in the Union Budget 2019-20 with an aim to discourage cash transactions and move towards less cash economy.
- The Central Board of Direct Taxes (CBDT) further notified that if a person has already withdrawn Rs 1 crore or more in cash up to August 31, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, in the current fiscal, the 2% TDS shall apply on all subsequent cash withdrawals.
- Any cash withdrawal prior to September 1, 2019, will not be subjected to the TDS.
- Since the threshold of Rs 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction under section 194N of the Finance Act shall be counted from April 1, 2019.
- TDS is a means of collecting income tax in India, under the Indian Income Tax Act of 1961. Any payment covered under these provisions shall be paid after deducting a prescribed percentage. It is managed by the Central Board for Direct Taxes (CBDT) and is part of the Department of Revenue managed by Indian Revenue Service.