Provisions Related to TDS on Withdrawal of Cash Requires Reconsideration
In the income tax act, section 194N is added. This new section is intended to discourage cash transactions. The provision states that a bank company or cooperative shall deduct the tax. A bank or postoffice will charge 2% on cash withdrawals from saving or current accounts. 1,000,000 during the course of an year.
If a person does not file a tax return for any of the three years preceding cash withdrawals, or the deadline for filing the returns under section 139(1) has passed, then the tax will be deducted.
(a) If more than Rs. 20 lakhs, the sum will be deducted at 2%. 20 lakhs, but not more than Rs. 1 crore;
(b) If more than Rs. 1 crore is taken, the sum will be refunded at a rate of 5%. 1 crore.
Banks and beneficiaries have had many problems with the TDS cash withdrawal provisions. The Govt. Clarify the provisions of the incoming budget 2022 . The following paragraphs discuss some critical points that section 194N raises.
The Chapter XVII covers Section 194N, which relates the tax collection and recovery. Sections 4 and Section 190 provide the enabling conditions for tax deduction and collection.
The relevant year’s total income shall be subject to income tax under section 4(1). Section 4(2) stipulates that for income charged under subsection (1), income taxes shall be taken at source and paid in advance if they are deductible under this Act.
Section 190 is about the deduct/collection and payment tax. Section 190’s subsection (1) provides the following:
“Notwithstanding that the regular assessment in respect of any income is to be made in a later assessment year, This income is subject to tax shall be payable by deduction or collection at source or by advance payment or by payment under sub-section (1A) of section 192, as the case may be, in accordance with the provisions of this Chapter.”
The provision clearly states that income from an assessee will trigger tax collection and deduction. The source cannot deduct or collect tax if the income received is not taxable.
Section 194N allows for the deduction of taxes from amounts withdrawn from accounts. This is in contradiction to Section 4 and Section 190. Cash withdrawn from bank accounts does not have an income component. The question of TDS shouldn’t arise. Therefore, Govt. To end potential litigation over this provision, Govt.
The section 194N of the joint accounts is not clear as to which party may have a right to a threshold amount.
If more than one individual holds a joint bank account, each owner can make or withdraw any amount. Benefits or money in a joint bank account can be shared equally. The bank doesn’t require or demand any specific sharing ratio. You will find more information in the next article. union budget 2022 expectationsThis issue must be addressed by the government.
In the event of company accounts, LLPs, or firms that have business accounts, bearer checks are available for payment. Cash is drawn by the individual and used to pay salary, reimbursed expenses, payments for vendors, etc. TDS should be applied in all cash transactions, no matter who receives it.
It is possible that individual payments (e.g., salary, reimbursements or vendor payments) are not held in the recipient’s bank account. Therefore, TDS cannot be used.
Although the law presumes that account holders and recipients will always be the same, it isn’t necessarily true given practical circumstances.
Section 194N also applies to cash withdrawn from bank accounts. This does not apply to individuals who have multiple bank accounts.
In order to invoke the provisions in section 194N the threshold limit is calculated for each bank. You can then withdraw money from different accounts. The threshold limit is applicable to all accounts, even if they are in the same branch. It cannot be combined with section 194N.