Cash withdrawal TDS or Tax Deducted at Source on cash withdrawals is a provision introduced in the Finance Act of 2020 to discourage cash transactions and promote digital payments. The government aims to track high-value cash transactions and curb tax evasion with this provision. This article explains the TDS on Cash Withdrawals, how it works, and who is liable to pay it.
Tax deducted at Source on Cash withdrawal is a tax deducted at source when a person withdraws cash from their bank account. This provision is applicable to individuals, Hindu Undivided Families (HUFs), and firms. The government has set a limit of Rs. 1 crore for cash withdrawals in a financial year. If a person withdraws more than this amount, the bank deducts 2% Tax deducted at Source on the excess amount.
When a person withdraws cash from their bank account, the bank deducts the Tax if the withdrawal amount exceeds Rs. 1 crore. For example, if a person withdraws Rs. 1.5 crore from their bank account, the bank deducts 2% TDS on the excess amount of Rs. 50 lakh. The Tax Deducted at Source amount is then deposited with the government on behalf of the person.
The liability to pay Tax deducted at Source on Cash Withdrawal on the bank where the person holds the account. The bank deducts the tax and deposits it with the government on behalf of the person. However, the person can claim a refund of the TDS amount if they have paid more tax than their actual liability.
Tax deducted at Source on Cash withdrawal has several implications for taxpayers and the economy as a whole. Some of the key implications of Cash Withdrawal TDS are discussed below:
There are certain exceptions to the TDS on cash withdrawals. The following transactions are not liable for TDS:
In conclusion, Tax deducted at Source on Cash Withdrawal is a provision introduced by the government to discourage cash transactions and promote digital payments. The TDS is deducted at the rate of 2% if the cash withdrawal amount exceeds Rs. 1 crore in a financial year. The liability to pay Tax Deducted at Source is on the bank, and the person can claim a refund if they have paid more tax than their actual liability. However, there are certain exceptions to TDS on Cash Withdrawal, such as withdrawals made by the government, certain categories of taxpayers, and for specific purposes. It is essential to be aware of these provisions to avoid any penalties or legal consequences.
Suggested Read – TDS on Life Insurance Policies
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