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Income Tax Department launches tool for Banks and Post Offices to ensure TDS rates on cash withdrawals

On the cash withdrawal exceeding Rs. 20 lakhs, TDS will be deductible at the rate of 2% and it will be deductible at the rate of 5% if the amount exceeds 1 Crore, in case the person withdrawing is a non- filer of the income tax return.

Jul 14, 2020 12:26 IST
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The Income Tax Department on July 12 launched a new tool for the banks and post offices that will ensure tax deduction at source (TDS) on the cash withdrawals beyond the threshold.

With the help of the tool, post offices and banks will be able to ascertain the TDS applicability rates on the cash withdrawals of above Rs. 20 lakh in case a person is a non- filer of the income tax return and that of above Rs. 1 crore in case of a filer of Income-tax return.

On the launch of the tool, the Central Board of Direct Taxes (CBDT) informed that so far more than 53 thousand verification requests have been executed successfully on this facility.

How the new tool will work?

As per CBDT, banks and post offices will have to enter the PAN of the person who will be withdrawing cash in order to ensure the applicable rates of TDS.

Once the PAN number is entered, a message will be instantly displayed on the departmental utility.

TDS will be deductible at the rate of 2%, if the cash withdrawal exceeds one crore and if the person withdrawing cash is a filer of the income tax return.

On the cash withdrawal exceeding Rs. 20 lakhs, TDS will be deductible at the rate of 2% and it will be deductible at the rate of 5% if the amount exceeds 1 Crore, in case the person withdrawing is a non- filer of the income tax return.

Amendment in Income Tax Act:

As per the Central Board of Direct Taxes (CBDT), the data on the cash withdrawal indicated that the huge amount of cash is being withdrawn by the people who have never filed income-tax returns.

In order to ensure the filing of return and to keep track on the cash withdrawals by the non-filers and to curb black money, the Finance Act, 2020, has further amended the Income Tax Act from July 1, 2020, to lower the threshold of cash withdrawal to Rs. 20 lakh for the applicability of this TDS for the ones who are non-filers.

The amendment also mandated the TDS at a higher rate of 5% on cash withdrawal which exceeds Rs. 1 crore by the non-filers of tax returns.

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