ALERT FOR NON FILLER AS WELL AS FILLER OF INCOME TAX RETURN

RECENT AMENDMENT IN SECTION 194N TO TRACK CASH WITHDRAWL TRANSACTIONS

1. HISTORY & OBJECTIVE OF SECTION 194N:

The Government of India had announced the demonetisation on 8^th November, 2016 and banned the old currency notes of Rs. 500 and Rs. 1000.00. According to our former finance minister Late Shri Arun Jaitley Ji, the positive impacts of demonetisation also included bringing back more money into the system i.e. banking system.

Since most of the currency came back into the banks as per the data of RBI. To extend the cash less economy transactions and to discourage or may be to track the cash transactions. Our Honourable Finance Minister Smt. Nirmala Sitaraman Ji, in the Union Budget 2019 was introduced Section 194N on Cash withdrawals exceeding Rs. 1 Crore from a banking company which comes under the Banking Regulation Act, 1949 (includes bank or any other financial institution referred to in section 51 of the act), A co-operative society indulged in banking processes, A post offices then these entity shall deduct the amount equal to 2% of the total sum from the recipient’s authorized account.

Now Section 194 N of the Income Tax Act has been amended vide clause 84 of Finance Act 2020, which shall be effective from the 1^st day of July, 2020 and it is noteworthy remark for Income Tax return filler or Non Filler.

2. Description of Section 194 N recent amendments vide clause 84 of Finance Act, 2020:

 3. Threshold limit and TDS rates (under the old and new regime):

4. Person to whom Section 194N law shall not apply on payment made to:

Ø  The Government

Ø  A bank or co-operative society engaged in the business of banking or a post office.

Ø  An entity related to a banking company or co-operative society which is indulged in the business of banking, working in accordance with the guidelines set by Reserve Bank of India under the Reserve Bank of India Act, 1934.

Ø  Any automated teller machine operator or a banking company or co-operative society indulged in the business of banking working in accordance with the laws of RBI mentioned under the Payment and Settlement Systems Act, 2007.

Ø  An individual or a group, Central Government (by an official message in Official Gazette), may appoint in consultation with Reserve Bank of India.

5. Revamped 26AS displays these specified Financial Transactions in 26AS.

The earlier Form 26AS used to give information regarding tax deducted at source and tax collected at source relating to a PAN, besides certain additional information including details of other taxes paid, refunds and TDS defaults. But now, it will have SFTs and Cash withdrawal transactions too.

The information being received by the Income Tax Department from the filers of these specified SFT’s is being shown in the Part E of Form 26AS. In Part E and reflects in tabular form in detail.

6. A few cases of Section 194N Transactions:

XYZ Ltd (having head office at Agra and branch office at Gurugram) is in the business of Shoes Manufacturing. Plant of XYZ Ltd is located in New Delhi. It has current accounts with PNB at Agra and Gurugram. Cash credit facility provided by PNB at New Delhi only. Head office, branch office have seprate TAN and GSTN, cash withdrawn from these accounts during the financial year 2020-2021 is as follows:-

Ø  From PNB Delhi on 1^st May, 2020 Rs. 19.40 Lakhs

Ø  From Gurugram Delhi on 3^rd Oct, 2020 Rs. 80.55 Lakhs

Ø  From PNB Agra on 10^th October, 2020 Rs. 1.50 Lakhs

Ø  From PNB Delhi on 10^th March, 2021 Rs.40.50 Lakhs

Situation No. 1:- XYZ Ltd always submitted return of income before due date. It want to know whether TDS provisions of section 194N are applicable.

Answer:

Situation No. 2:- XYZ Ltd has not submitted return of previous 3 year income before due date. It want to know whether TDS provisions of section 194N are applicable.

Answer: