- Date : 09/09/2020
- Read: 2 mins
The IT Department has authorised banks and post offices to deduct TDS on large cash withdrawals from customers who have not filed their ITR
The Income Tax Department via a notification included Scheduled Commercial Banks (SCBs) in the list of agencies with which tax authorities can share information of taxpayers. With this, banks will now be able to check a customer’s Income Tax returns (ITR) based on their PAN details.
In case a customer is making large withdrawals from their account and has not filed income tax returns for the last three consecutive years, banks and post offices can levy TDS (Tax Deducted at Source) in case the annual withdrawal crosses a certain threshold.
Why has this change been introduced?
After analysing data on cash withdrawals, it has come to the IT Department’s attention that a large volume of withdrawals is happening from accounts associated with individuals who have never filed income tax returns. In a bid to track such activity and bring in tax compliance, the IT department has empowered banks and post offices to verify such customer’s tax status and charge TDS, if applicable.
What is the threshold for TDS on cash withdrawals?
With effect from July 1, cumulative cash withdrawals from all bank accounts exceeding Rs 20 lakh but less than Rs 1 crore will attract a TDS of two per cent. In case the withdrawals are greater than Rs 1 crore, the applicable rate of TDS would be five per cent.
The Income Tax Department has released a new functionality ‘ITR Filing Compliance Check’ that will be made available to SCBs. Banks can either access the ‘Verification of applicability u/s 194N’ on www.incometaxindiaefiling.gov.in or use an API-based exchange to automate and integrate the process with the Bank’s core banking solution.
With this, the financial institution will be able to check the IT Return filing status of PANs in bulk mode and get the applicable rate of TDS under Section 194N of the Income-tax Act, 1961. Here's a handy guide on how to use the new ITR Form.