What are the TDS rates applicable on cash withdrawals that are effective from July 01?

To curb slippages in the payment of taxes, the IT department plans to tighten the noose around those not filing ITRs. Finance Act 2020 introduced higher TDS or tax deducted at source on cash withdrawals from banks for those who do not file ITR. This goes live from July 01 and this move is essentially to expand the tax base and also curb cash transactions.

The rates are also quit prohibitive. If an individual has not filed the ITR for 3 consecutive financial years, they will have to pay TDS at 2% if amount withdrawn from bank is between Rs.20 lakhs and Rs.1 crore in a fiscal year. If the amount withdrawn exceeds Rs.1 crore then TDS will be deducted at the rate of 5%. Above Rs.1 crore, payment of TDS is mandatory.

The key point to note is that TDS has to be deducted only when aggregate cash withdrawal during the fiscal exceeds Rs.20 lakh. This applies to bulk withdrawals and for phased withdrawals. In the latter case, the entire amount will be retrospectively adjusted by TDS once the threshold is crossed.

In case, the individual does not furnish the PAN to the bank, TDS at a higher penal rate of 20% will become applicable. This TDS will be applicable irrespective of whether you withdraw from commercial banks, co-operative banks or post offices. The limit will apply on all the accounts in the same bank. For accounts with different banks, limits apply separately.