The revenue department on Friday said the 2 per cent tax deduction at source (TDS) on cash withdrawals of over Rs 1 crore will come into effect from September 1.
The Central Board of Direct Taxes (CBDT) further said that if a person has already withdrawn Rs 1 crore or more in cash up to August 31, 2019, in the current fiscal, the two per cent TDS shall apply on all subsequent cash withdrawals.
The government had made the provision of levying 2 per cent TDS on cash withdrawals exceeding Rs 1 crore in the Union Budget with an aim to discourage cash transactions and move towards less cash economy.
After receiving queries regarding the levy of the TDS, CBDT said the provision "is to come into effect from September 1, 2019".
Hence, any cash withdrawal prior to September 1, 2019, will not be subjected to the TDS.
"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 194N of the Finance Act shall be counted from April 1, 2019," it said.
Hence, if a person has already withdrawn Rs 1 crore or more in cash up to August 31, 2019 from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two per cent TDS would apply on all subsequent cash withdrawals.