The Tax Department has introduced updated regulations aimed at reducing cash transactions and ensuring tax compliance. These new Tax Deducted at Source (TDS) rules, effective from July 1, focus on cash withdrawals from banks and post offices, particularly for high-value transactions.
- TDS on Cash Withdrawals Over Rs 20 Lakh: New Criteria If you’re making significant cash withdrawals exceeding Rs 20 lakh in a financial year, the TDS rate will now depend on your Income Tax Return (ITR) filing history over the past three years.
- TDS Rules for Recent ITR Filers The introduction of Section 194N in the 2019 budget brought in a 2 percent TDS for cash withdrawals exceeding Rs 1 crore from bank and post office accounts. If you’ve withdrawn Rs 99 lakh in cash during the financial year and then withdraw an additional
- Rs 1.50 lakh, only the extra Rs 50,000 will be subject to a 2 percent TDS.
- Special Considerations for PAN Card Updates Outdated PAN card details in your bank records could lead to a substantial TDS charge of up to 20 percent under Section 206AA of the Income Tax Act.
- Exemption for Recent ITR Filers If you’ve filed an income tax return within the last three years and possess a valid PAN card, cash withdrawals below Rs 1 crore won’t incur any TDS. Banks may verify your return filing status by requesting your ITR-V or cross-checking through the Income Tax Department’s e-filing portal.
- TDS Rules for Non-ITR Filers Individuals who haven’t filed an income tax return in the past three years face different TDS rates:
- No TDS on cash withdrawals up to Rs 20 lakh.percent TDS for withdrawals between Rs 20 lakh and Rs 1 crore.5 percent TDS for cash withdrawals exceeding Rs 1 crore.
These new TDS rules aim to promote transparency and encourage tax compliance while monitoring high-value cash transactions. It’s essential to be aware of these changes, especially if you frequently make large cash withdrawals.