india

Updated: Aug 31, 2019 06:53 IST

The budget decision to levy a 2% tax deduction at source (TDS) on cash withdrawal in excess of Rs 1 crore in a year will be applicable from September 1, the Central Board of Direct Taxes (CBDT) clarifies on Friday.

The 2% TDS will, however, be applicable from day one on all such cases where a person has already exhausted the Rs 1 crore limit for 2019-20, according to a statement issued by CBDT.

CBDT said it had issued the clarification after it receiving “queries” from “the general public through social media on the applicability of this section on withdrawal of cash from 01.04.2019 to 31.08.2019”.

Having considered the “concerns of the people”, the direct tax board clarified the budget provision “is to come into effect” from September 1, 2019. “Hence, any cash withdrawal prior to 1st September, 2019 will not be subjected to TDS under Section 194N of the Act,” the statement said.

“However, since the threshold of Rs 1 crore is with respect to the previous year [with reference to the assessment year 2020-2021] under the Income Tax Act, calculation of amount of cash withdrawal for triggering deduction under section 194N of the Act shall be counted from 1st April, 2019,” it said.

“Hence, if a person has already withdrawn Rs 1 crore or more in cash upto 31st August, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two per cent TDS shall apply on all subsequent cash withdrawals,” it clarified.

Finance minister Nirmala Sitharaman introduced the levy in her first budget that was presented in July 5. “In order to discourage large amount of cash withdrawal from bank accounts, it is proposed to provide for tax deduction at source at the rate of 2% on cash withdrawal by a person in excess of Rs 1 crore in a year from his bank account,” she said in her budget speech.