Tax calculation: The Income Tax department has announced that cash withdrawals by foreign representations will not be subject to Tax Deducted at Source (TDS) starting from December 1.
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As per section 194N of the Act, TDS is required to be deducted when an individual withdraws a sum exceeding Rs 20 lakh in cash during a fiscal year without having filed income tax returns for the previous three Assessment Years (AYs), or if the sum exceeds Rs 1 crore and income tax returns have been filed for at least one of the three previous AYs. TDS is deducted by banks (private, public, and cooperative) and post offices when making cash payments exceeding Rs 20 lakh or Rs 1 crore from the individual’s account maintained with them.
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“The Central Government after consultation with the Reserve Bank of India, hereby specifies that 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,” a notification by the Income Tax Department said.
As of now, this provision excludes Central and state government entities, private and public sector banks, all cooperative banks, post offices, business correspondents of banks, operators of white label ATMs, specified commission agents and traders of the Central government under APMC, authorized dealers and their franchisees, and Full-Fledged Money Changers licensed by RBI and their franchisees from making payments to farmers for the purchase of agricultural produce.
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The provision, which came into effect on September 1, 2019, stated that TDS will be deducted at a rate of 2 per cent on cash withdrawals exceeding Rs 1 crore for individuals who have filed income tax returns for any or all of the preceding three assessment years. However, if the person withdrawing the cash has not filed an ITR for any of the preceding three AYs, TDS will be deducted at 2% on withdrawals exceeding Rs 20 lakh and 5% on withdrawals exceeding Rs 1 crore.
