In the Union Budget for 2019-20, the government has proposed to impose a TDS or tax deduction at source of 2 per cent if an individual or an entity withdraws Rs 1 crore or more from a bank account in a financial year. In the Finance Bill, tabled in Parliament by Finance Minister Nirmala Sitharaman on Friday, the government proposed to introduce a new section, Section 194N, in the Income Tax Act. Tax experts say the amendments to the Income Tax Act, which will come into effect from September 1, are aimed at discouraging cash dealings.
"In order to make India a less cash economy, there are many steps government that the government has taken," Naveen Wadhwa of Taxmann told NDTV in a telephonic conversation.
The government has however mentioned in the Finance Bill that the tax will not be levied if the amount is withdrawn from the bank or post office by the central or state government, banks, co-operative banks, post offices, banking correspondents, white label ATM operators and other persons notified by the government in consultation with the Reserve Bank of India (RBI).
"If an individual withdraws Rs 4 lakh per week for petty expenses at the end of the tenth month the person will exceed the Rs 1 crore limit and tax will deducted at the rate of 2 per cent. The bank will deduct Rs 2 lakh as tax and will deposited it with the government," Mr Wadhwa explained.
"The government has introduced Section 194N in the Finance Bill if an individual or an entity withdraws Rs 1 crore or more from the bank account, the government directed banks to deduct TDS at 2 per cent this is not an individual withdrawal limit however it is an aggregate limit," Mr Wadhwa said.
Get Breaking news, live coverage, and Latest News from India and around the world on NDTV.com. Catch all the Live TV action on NDTV 24x7 and NDTV India. Like us on Facebook or follow us on Twitter and Instagram for latest news and live news updates.