Check new TDS rules for PPF,
other small savings schemes
Rules apply only for cash withdrawals of non-ITR filers
BINDISHA SARANG
The Department of Posts (DoP) — trading
as India Post — has issued new rules for
tax deducted at source (TDS) if the aggre-
gate withdrawal from all post office
schemes is more than ~20 lakh.
Kapil Rana, founder and chairman,
HostBooks, says, “DoP has brought the
withdrawal from all post office schemes
under the preview of Section 194N and
will deduct tax in accordance with the pro-
visions mentioned in this Section.”
Some of these schemes are Public
Provident Fund, National Pension System,
and Sukanya Samriddhi Yojana.
Possible implications
According to the new norms, if an investor
has not filed his income-tax returns (ITR)
for three assessment years, TDS will be
deducted from the withdrawal amount.
This new rule is applicable with effect
from July 1, 2020.
Gopal Bohra, partner, N.A. Shah
Associates, says, “In case the assessee
has furnished return for all the three
assessment years immediately preceding
the previous year in which cash
was withdrawn, tax is required to
be deducted at the rate of
2 per cent on cash withdrawn in
excess of ~1 crore.”
If an assessee has not filed
return for all the three assessment
years immediately preceding the
previous year in which cash was
withdrawn, and the due date for
YOUR
filing the return under Section MONEY
139(1) has expired, tax is required
to be deducted at the following rates:
(a) 2 per cent cash withdrawn in
excess of ~20 lakh if the aggregate of the
amount withdrawn exceeds ~20 lakh
during the previous year, but does not
exceed ~1 crore;
(b) 2 per cent on cash withdrawn in
excess of ~20 lakh, but up to ~1 crore, at the
rate of 5 per cent from the sum withdrawn
in excess of ~1 crore.
In the Union Budget 2021-22, Finance
Minister Nirmala Sitharaman had
said senior citizens above the age of
75, who only have pension and
interest as source of income, will be
exempted from filing ITR.
Will this rule apply to them since they
are not required to file returns?
Bohra says, “Senior citizens, exempted
from filing returns, will be required to file
WHAT IT COSTS
Amount paid in cash during a
Rate of income
financial year to a customer
tax (TDS)
in all accounts
A. For non ITR Filers
(a) If aggregate Cash withdrawal
2% of amount
exceeds ~20 Lakh but does
exceeds
not exceed ~ 1 crore
~ 20 lakh
during a FY
(b) If cash withdrawal exceeds 5% of amount
~1 crore during a FY above ~ 1 crore
B. For ITR filers
If cash withdrawal exceeds 2% of amount
~ 1 crore during a FY above ~ 1 crore
Source: Income Tax Circular
tax returns if they have an account in the
post office. That exemption is permitted
only if such a senior citizen has pension
and interest in one bank account.”
Course of action
Pay up seems to be the only
way out.
Rana says, “Because withdra-
wal from various post office
schemes has come under the pre-
view of Section 194N, anyone who
needs to withdraw from such
schemes must consider the TDS
provisions of the said Section. He
should comply with I-T provisions
to avoid TDS or pay TDS at a
reduced TDS rate.”
Section 194N of the I-T Act, 1961, pro-
vides that every banking company
(including any bank or banking institu-
tion), co-operative bank or post-office,
responsible for payment of cash to a per-
son, from one or more accounts main-
tained by him, shall be required to deduct
tax under this provision.
Naveen Wadhwa, deputy general man-
ager, Taxmann, says, “This provision pro-
vides for deduction of tax only if the asses-
see has received cash from any banking
company (including any bank or banking
institution), co-operative bank or a post-
office. Further, the threshold limit is lower
and the rate of deduction is high in the
case of a non-filer of return of income.
Thus, it is advisable to file return of income
and move towards a cashless economy.”