Cash withdrawal from multiple accounts to be aggregated for levying 2% TDS

The Finance Bill, 2019, said any bank or a co-operative society engaged in carrying on the business of banking; or post office, who is responsible for paying any sum, in cash, in excess of Rs one crore during the previous year, to any person from "an account" maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to 2 per cent of sum exceeding Rs 1 crore, as income-tax.

The Finance Bill amendment replaced "an account" to "one or more accounts".

Further, the amendments to the Finance Bill also clarified that the total TDS paid on cash withdrawal beyond Rs 1 crore will be adjusted against the total tax dues of the taxpayer and would not be constituted as income in hands of the taxpayer. This provision would come into effect from September 1, 2019.

"I want to assure the members that if there are people who are taxpaying citizens, who have withdrawn like this, this TDS will be adjusted against the total tax dues.

"So, it is not over and above what he is expected to pay as tax, but it is going to be reconciled with the total tax claims which is going to be laid on this individual. So, it is not something which is running parallel to it," Sitharaman said while replying in the debate on Finance Bill.

Nangia Advisors (Andersen Global) Managing Partner Rakesh Nangia said there was a possibility that people may misuse the TDS provision by maintaining various bank accounts.

"The amended proposal provides that if a person maintains more than one account with the same bank, the bank shall aggregate the withdrawals made from all such accounts to compute the threshhold. Though this amendment plugs the loophole but partially, since even not a person can maintain various accounts with difference banks and withdraw less than Rs 1 cr from each such bank to avoid the TDS," Nangia said.