Post Offices to deduct TDS on Cash Withdrawal above Rs. 20 lakh from National (Small) Savings Schemes for non-ITR filers [Read Circular]

The Central Government has directed the Post Offices to deduct the TDS in respect of aggregate Cash Withdrawal above Rs. 20 lakh by an account holder of National (Small) Savings Schemes for non-ITR filer under section 194N of Income Tax Act 1961.

The Government has amended section 194N of the Income Tax Act, 1961 through Finance Bill 2020 for deduction of TDS at the rate of 2% on aggregate cash withdrawals in excess of Rs. 20 Lakh in a year and deduction of 5% TDS  on aggregate cash withdrawals in excess of Rs. 1 Crore in a year in case of a recipient who has not filed the returns of income for all the three assessment years relevant to the three previous years.

These new provisions in section 194N are applicable from July 1, 2020.

In other words, for non ITR Filers if aggregate Cash withdrawal exceeds Rs. 20 Lakh but does not exceed Rs. 1 Crore during a FY then the TDS at the rate of 2% of amount exceeds Rs. 20 lakh will be applicable. If Cash withdrawal exceeds 1 Crore during a FY then the TDS at the rate of 5% of the amount above Rs. 1 crore will be applicable.

In case of ITR filers If Cash withdrawal exceeds Rs. 1 crore during a FY then TDS at the rate of 2% of amount exceeds Rs. 20 lakh will be applicable.

These changes are not yet incorporated in Finacle and to facilitate Post Offices CEPT has identified and extract the details of such depositors for the period from 01/04/2020 to 31/12/2020, CEPT will forward the list in excel to concerned Circle/CBS CPCs of the concerned Circles with details of account, PAN number if available along TDS amount to be deducted.

“Incharge, CPC(CBS) of the Circle shall forward the details to respective Post Office and take up for deduction of TDS from such customers/account without fail,” the circular said.

Respective Post Office will deduct TDS and account under Section 194N. Account holders should be informed of such deductions in writing. A voucher will be prepared and signed by the Postmaster concerned for the TDS amount, which will be forwarded to HO/SBCO along with other SB vouchers.

It is noteworthy that  it is a regulatory provision and the concerned postmaster is personally responsible for deduction of TDS as per rules, Non-deduction of TDS may attract recovery/penalty.

“CEPT, Chennai will provide details of such Account Holders in the first week of every month to the respective CPC. CPC will check all these entries in respect of applicability of TDS as prescribed in CBDT press release dated 12.07.2020 (copy enclosed) and as detailed After verifying all the entries received from CEPT, Chennai, the concerned CPC will share details with respective Post Offices for deduction of TDS on applicable rates as detailed above,” the government said. The circular added that the circle shall ensure that all due TDS under section 194N is deducted by the concerned Post Offices and incorporated by concerned HOs in the TDS returns. It is requested to circulate this amendment to all concerned for information and guidance and necessary action.