Section 194N - Payment of certain amounts in cash - Income Tax - Ready Reckoner - Income Tax

Section 194N - Payment of certain amounts in cash The provision of this section 194N is inserted with effect from 01.09.2019. Applicability Every person, being,- (i) a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act); (ii) a co-operative society engaged in carrying on the business of banking; or (iii) a post office, who is responsible for paying any sum, being the amount or the aggregate of amounts, as the case may be, in cash Rs. 1 one crore during the previous year, to any person (herein referred to as the recipient) from one or more accounts maintained by the recipient with it. Rate of TDS During the period of 01.09.2019 to 30.06.2020 equal to 2% of such sum where the amount or aggregate of amounts being paid in cash, if exceeds Rs. 1 crore From the period of 01.07.2020 (i) In case of a recipient who has filed the returns of income for all of the 3 assessment years relevant to the 3 previous years an amount equal to 2% of the sum where the amount or aggregate of amounts being paid in cash exceeds Rs. 1 crore other than Co-operative society or Rs. 3 crore in case of co-operative society [Amended by FA, 2023 , w.e.f., 01.04.2023] (ii) In case of a recipient who has not filed the returns of income for all of the 3 assessment years relevant to the 3 previous years In case of a recipient who has not filed the returns of income for all of the 3 assessment years relevant to the 3 previous years, for which the time limit of file return of income under section 139(1) has expired, immediately preceding the previous year in which the payment of the sum is made to him, the provision of this section shall apply with the modification that - The deduction of TDS shall be - (a) an amount equal to 2% of the sum where the amount or aggregate of amounts, being paid in cash exceeds Rs. 20 lakh during the previous year but does not exceed Rs. 1 crore ( Rs. 3 crore in case the recipient is co-operative society) ; or (b) an amount equal to 5% of the sum where the amount or aggregate of amounts, being paid in cash exceeds Rs. 1 crore ( Rs. 3 crore in case the recipient is co-operative society) during the previous year. Non applicability Liability to deducted tax at source u/s 194N shall not be applicable to any payment made to The Government Any banking company or Co-operative society engaged in carrying on the business banking or a post-office Any business correspondent of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with RBI guidelines. Any white label ATM operator of a banking company or co-operative society engaged in carrying on the business, in accordance with authorisation issued by the RBI under the payment and settlement system act, 2007. The Central Government may specify, with the consultation of RBI, by notification, the recipient in whose case section 194N shall not apply at reduce rate, subject to the satisfaction of the conditions specified in such notification. Accordingly, the Central Government after consultation with the Reserve Bank of India, hereby specifies Commission agent or trader, operating under Agriculture Produce Market Committee (APMC), and registered under any Law relating to Agriculture Produce Market of the concerned State For availing exemption from applicability of TDS u/s 194N, The commission agent who has intimated to the banking company or co-operative society or post office his account number through which he wishes to withdraw cash in excess of Rs. 1 crore in the previous year along with his Permanent Account Number (PAN) and the details of the previous year and has certified to the banking company or co-operative society or post office that the withdrawal of cash from the account in excess of Rs. 1 crore during the previous year is for the purpose of making payments to the farmers on account of purchase of agriculture produce and the banking company or co-operative society or post office has ensured that the PAN quoted is correct and the commission agent or trader is registered with the APMC, and for this purpose necessary evidences have been collected and placed on record. [ w.e.f. 01.09.2019] Cash Replenishment Agencies (CRA s) and franchise agents of White Label Automated Teller Machine Operators (WLATMO s) franchise agents of White Label Automated Teller Machine Operators (WLATMO s) maintaining a separate bank account from which withdrawal is made only for the purposes of replenishing cash in the Automated Teller Machines (ATM s) operated by such WLATMO s and the WLATMO have furnished a certificate every month to the bank certifying that the bank account of the CRA s and the franchise agents of the WLATMO s have been examined and the amounts being withdrawn from their bank accounts has been reconciled with the amount of cash deposited in the ATM s of the WLATMO s. [ w.e.f. 01.09.2019] Full Fledged Money Changers (FFMC) (a) the authorised dealer and its franchise agent and sub-agent; and (b) Full-Fledged Money Changer (FFMC) licensed by the Reserve Bank of India and its franchise agent; Such person should maintain a separate bank maintaining a separate bank account from which withdrawal is made only for the purposes of,- (i) purchase of foreign currency from foreign tourists or non-residents visiting India or from resident Indians on their return to India, in cash as per the directions or guidelines issued by Reserve Bank of India; or (ii) disbursement of inward remittances to the recipient beneficiaries in India in cash under Money Transfer Service Scheme (MTSS) of the Reserve Bank of India; The exemption from the requirement to deduct tax u/s 194N would be available only if a certificate is furnished by the authorised dealers and their franchise agent and sub-agent, and the Full Fledged Money Changers (FFMC) and their franchise agent to the bank that withdrawal is only for the purposes specified above and the directions or guidelines issued by the Reserve Bank of India have been adhered to. Authorised dealer means a person authorised as an authorised dealer under section 10(1) of the FEMA,1999 . The provisions of section 194N of the said Act shall not apply to Foreign Representations duly approved by the Ministry of External Affairs of the Government of India including Diplomatic Missions, agencies of the United Nations, International Organisations, Consulates and Offices of Honorary Consuls which are exempt from paying taxes in India as per the Diplomatic Relations (Vienna Convention) Act 1972 and the United Nations (Privileges and Immunities) Act 1947. w.e.f. 01.12.2024 [ Notification no. 123/2024 dated 28.11.2024] Person to whom credit is to be given for tax deducted and paid Rule 37BA provides the manner of giving credit for tax deducted and remitted to the Central Government i.e. specifies the person to whom credit for tax deducted is to be given and also the assessment year for which the credit may be given. Accordingly, the rule 37BA(3A) has been inserted, for the purposes of section 194N, credit for tax deducted at source shall be given to the person from whose account tax is deducted and paid to the Central Government account for the assessment year relevant to the previous year in which such tax deduction is made.