Clarification by Government of India in relation to section 194N
Introduction: Since its introduction section 194N is in the controversy and once again after the amendment by Government of India. On 20th July, 2020 government has again issued clarification in regard to various practical question raised by various stakeholders
According to amendment following is the scenario:
i) If the assessee hasn’t filed the income tax return for any of the three consecutive previous year with the time limit specified under section 139(1):
In that case rate of deduction will be 2% on the amount withdrawn in excess of Rs. 20 lakhs up to Rs. 1 crore withdrawn while 5% applicable on the amount exceeding the INR 1 crore of the financial year.
ii) If the assessee has filed the income tax return for the given year:
TDS deduction applicable only at the rate of 2% on amount withdrawn in excess of Rs. 1 crore.
Therefore, if assessee wants to avail the benefit of reduced rate then Income Tax return for three consecutive year must be filed within the specified time period as per section 139(1).
Basically, section 194N provides to levy TDS when cash withdrawal exceeds the specified limit; i.e. Tax is to be deducted at source when the payment is made by Bank or Co-operative society engaged in business of banking or Post office to the assessee and the payment exceeds above limit of Rs. 1 Crore or Rs. 20 Lahks at rate of 2% or 5%. In this regard it was specified by central government that this section will not be applicable to specified assessee and the said will be notified by way of issue of notification. In this regard central government has specified three different types entity by way of notification 68 of 2019 dated 18.09.2019, 70 of 2019 dated 20.09.2019 and 80 of 2019 dated 15.10.2019. These entities are as follows:
- Cash Replenishment Agencies (CRAs) and franchise agents of White Label Automated Teller Machine Operators (WLATMOs) for the purpose of replenishing cash in ATMs operated by these entities subject to conditions mentioned in the notification. (Entity restoring back cash in ATM machine).
- 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 have been exempted subject to conditions specified in the notification.
- The authorized dealer and its franchise agent and sub-agent and full-fledged money changer (FFMC) licensed by the Reserve Bank of India and its franchise agent 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 (MFSS) of the Reserve Bank of India; and subject to the conditions specified in the notification.
Due to amendment the chronology of section was disturb and all the stakeholder were waiting what is the view of the government in this regards and government has clarified by this clarification that all the three notifications will be valid and will also it has been clarified that exemption allowed under the said notifications shall be subject to the conditions laid down therein.