In order to discourage cash transactions and increase tax compliance, the income tax department has amended TDS rules.
In the 2019-20 budget, the government had introduced a TDS levy of 2 per cent on cash withdrawals of more than Rs 1 crore from a bank account in one financial year to discourage business payments in cash. But now, with effect from July 1, 2020, the TDS net has been widened further, reports Live Mint.
According to the report, for high-value cash transactions totalling over Rs 20 lakh in a given financial year, the TDS rate is directly dependent on whether you have filed your income tax returns (ITR) for the last three years or not.
As per the report, a person who has not updated PAN (Permanent Account Number) in bank will have to pay a higher TDS of 20%, which will be deducted under Section 206AA of the Income Tax Act. But, if the PAN details and ITR have been filed for last three years, then no TDS will charged or aggregate cash withdrawals of less than Rs 1 crore.
Income tax department has also amended the TDS form. The form is now more comprehensive making it mandatory for deductors to state reasons for non-deduction of tax. As per new form, banks will also have to report Tax Deducted at Source (TDS) for cash withdrawals above Rs 1 crore. The Central Board of Direct Taxes (CBDT) has amended Income Tax Rules to include TDS on e-commerce operators, dividend distributed by mutual funds and business trusts, cash withdrawals, professional fees and interest.
Here are the new TDS rules for those who have not filed ITR:
For cash withdrawals upto Rs 20 lakh: No TDS
For cash withdrawals of Rs 20 lakh to Rs 1 crore: TDS at the rate of 2%
For cash withdrawals exceeding Rs 1 crore: TDS at the rate of 5%
