A new section 194N introduced which increased the stress level for many. The Section came in effect on 1st September, 2019.  It brings good for Government but on the other hand problem for the common people. Let’s understand the new section.

Section 194N is applicable in case of cash withdrawals of more than Rs 1 crore during a financial year. This section will apply to all the sum of money or an aggregate of sums withdrawn from a particular payer in a financial year.

Ans: This section introduced in the Union Budget 2019 proposed on 5 July 2019. The main purpose is to discourage cash transaction and promote Digital Economy.

No GST Annual Return for businesses upto Rs 2 crore Turnover?

Ans : The section will apply to withdrawals made by any taxpayer including;

Ans: Payer/Person making payment as below;

Ans: The ceiling limit is Rs. 1 Crore per bank account per annum.

Ex: If a person has withdrawn Rs. 98 Lakhs previously and now he is withdrawing another Rs. 2.5 lakh, then TDS shall be made only to Rs. 50,000.00 at 2% i.e., Rs. 1000 shall be the TDS amount.

Difference between Section 44AD, 44ADA and 44AE of Income Tax Act

Ans: The provisions of Section 194N will be applied to the payments made on or after 1st September 2019.

 Ans: The limit of Rs 1 crore will be applicable to the cash withdrawals made from 1st April 2019 to 31st March 2020 i.e. during the FY 2019-20. Hence the amount withdrawn previously shall be considered to calculate Rs. 1 Crore as well but TDS shall be deducted from 1st September and not from any previous date retrospectively.

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Ans: No, TDS will not be applicable on that amount.

Following are the cases of cash withdrawn:

Case	1st April 19 – 31st Aug 19 (A)	1st Sept 19 – 31st March 20 (B)	Total Withdrawals	Tax for Period A	Tax for Period B	Total Tax
1	90,00,000	10,15,000	1,00,15,000	–	2% of 15000	300
2	1,10,00,000	20,000	1,10,20,000	–	2% of 20000	400
3	90,00,000	5,00,000	95,00,000	–	–	–

Q9. Why people are protesting against this new section?

Ans: As this will stop rotation of bank balance in form of cash which is the main requirement in many businesses. In some businesses net profit does not reach to 2%. In this time of inflation, amount in the form of TDS will be blocked for a period of time. That’s the reason people are protesting against it.

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The author of above article is Riya Thawani. 

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