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In order to discourage cash transactions and move towards less cash economy, the Finance (No. 2) Act, 2019 has inserted a new Section 194 N in the Income-tax Act,1961 (the ‘Act’), to provide for levy of tax deduction at source (TDS) @2% on cash payments in excess of one crore rupees in aggregate made during the year, by a banking company or cooperative bank or post office, to any person from one or more accounts maintained with it by the recipient. The above section shall come into effect from 1st September, 2019.

Since the section provided that the person responsible for paying any sum, or, as the case may be, aggregate of sums, in cash, in excess of one crore rupees during the previous year to deduct income tax @2% on cash payment in excess of rupees one crore,queries were received from the general public through social media on the applicability of this section on withdrawal of cash from 01.04.2019 to 31.08.2019.

The CBDT, having considered the concerns of the people, hereby clarifies that Section 194 N inserted in the Act, is to come into effect from 1st September, 2019. Hence, any cash withdrawal prior to 1st September, 2019 will not be subjected to the TDS under Section 194 N of the Act. However, since the threshold of Rs. 1 crore is with respect to the previous year, calculation of amount of cash withdrawal for triggering deduction under Section 194 N of the Act shall be counted from 1st April, 2019. Hence, if a person has already withdrawn Rs. 1 crore or more in cash upto 31st August, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two per cent TDS shall apply on all subsequent cash withdrawals.


Ministry of Finance

[Press Release dt. 30-08-2019]

Legislation UpdatesNotifications

The Central Board of Direct Taxes (CBDT) had earlier notified amended Form 24Q for filing TDS statement by deductors of tax vide Notification No. 36/2019 dated 12-04-2019. Subsequently, the File Validation Utility (FVU) for online filing of Form 24Q was updated by NSDL on 21st of May, 2019.

With a view to redressing genuine hardship of deductors in timely filing of TDS statement in Form 24Q on account of revision of its format and consequent updating of the File Validation Utility for its online filing, CBDT has ordered the following:

(i) Extended the due date of filing of TDS statement in Form 24Q for the financial year 2018-19 from 31st of May, 2019 to 30th of June, 2019 and

(ii) Extended the due date for issue of TDS certificate in Form 16 for the financial year 2018-19 from 15th of June, 2019 to 10th of July, 2019.

Order dated 04.06.2019 issued under section 119 of the Income-tax Act, 1961 to this effect is available on www.incometaxindia.gov.in.


[Notification dt. 04-06-2019]

Ministry of Finance

Case BriefsSupreme Court

Supreme Court: Answering the question as to whether the phrase “income which does not form part of total income under this Act” appearing in Section 14A of the Income Tax Act, 1961 includes within its scope dividend income on shares in respect of which tax is payable under Section 115-O of the Act, the Court held that Section 14A of the Act would apply to dividend income on which tax is payable under Section 115-O of the Act.

The Court said that the object behind the introduction of Section 14A of the Act by the Finance Act of 2001 was to check the claim of allowance of expenditure incurred towards earning exempted income in a situation where an assessee has both exempted and non-exempted income or includible or non-includible income. It was further said that a plain reading of Section 14A would show that the income must not be includible in the total income of the assessee. Once the said condition is satisfied, the expenditure incurred in earning the said income cannot be allowed to be deducted. The section does not contemplate a situation where even though the income is taxable in the hands of the dividend paying company the same to be treated as not includible in the total income of the recipient assessee, yet, the expenditure incurred to earn that income must be allowed on the basis that no tax on such income has been paid by the assessee.

With regard to the species of dividend income on which tax is payable under Section 115-O of the Act, the Court said that the earning of the said dividend is tax free in the hands of the assessee and not includible in the total income of the said assessee. The Court said that even if it is assumed that the additional income tax under Section 115-O is on the dividend and not on the distributed profits of the dividend paying company, no material difference to the applicability of Section 14A would arise. Sub-sections (4) and (5) of Section 115-O of the Act makes it very clear that the further benefit of such payments cannot be claimed either by the dividend paying company or by the recipient assessee. It was hence held that Section 14A of the Act would operate to disallow deduction of all expenditure incurred in earning the dividend income under Section 115-O which is not includible in the total income of the assessee. [Godrej & Boyce Manufacturing Company Ltd. v. Dy. Commissioner of Income Tax, 2017 SCC OnLine SC 549, decided on 08.05.2017]