In union Budget, Finance Minister Nirmala Sitharaman had proposed 2% tax on deduction at source (TDS) on Rs. 1 crore cash withdrawal from an account. i.e. TDS will be charged if aggregate withdrawal from “one or more accounts” of a person exceeds Rs 1 crore.
The reason behind the applicability of TDS is to discourage high-value withdrawals.
This amendment is approved by a voice note by Lok Sabha.The amendment, along with 28 others.
A concern rose that a person holding multiple accounts could have misused this. To eliminate this loophole, Finance Bill has amended the term “an account” by replacing it to “one or more accounts”.
Therefore, any bank or a co-operative society engaged in carrying on the business of banking, post office, is required to deduct TDS @2% of sum exceeding Rs. 1 Crore, while making payment to any person from “one or more accounts” maintained by the recipient.
It is also clarified that the total TDS paid by the person on such cash withdrawals will be adjusted against the total tax dues from the taxpayer and it would not be constituted as income in hands of the taxpayer.
Note : The provisions shall come into force with effect from September 1, 2019.