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Archita Bhattacharjee
| Updated: 18 Jul, 2020 | Category: Latest News, TDS Return

TDS on Cash withdrawal and Refund of TDS excessively deposited: Latest Orders

Refund of TDS

The idea of TDS was announced to collect tax from the appropriate source of income. According to the concept, a person (deductor) who is accountable for making payment of quantified nature to any other person (deductee) will deduct tax at source and remit the same interest in the central government’s account. The deductee would be entitled to get a credit of the amount from whose income tax has been deducted at source so deducted based on Form 26AS or TDS certificate allotted by the deductor.

In this article, you will get all the updates on the pronouncement given by the Central Board of Direct Taxes and Delhi High Court on TDS on Cash Withdrawals. CBDT has enabled Online Facility to check the applicable Rate of TDS and Refund of TDS, which were excessively deposited.

Refund of TDS

CBDT permits Online Facility to check applicable Rate of TDS on Cash Withdrawals

The Income Tax Department has enabled a new operational for Post offices and Banks through which they can determine the TDS applicability rates on cash withdrawal. In such situations, the cash withdrawal must be of above Rs. 1 crore in case of a filer of the ITR and that of above Rs.20 lakh in case of a non-filer of Income Tax Return(ITR). 

According to till date survey, more than 53,000 verification requests have been executed efficaciously in this new functionality and operation.

Where and why is it available?

This functionality has been available since 1st July 2020 on www.incometaxindiaefiling.gov.in as “Verification of applicability u/s 194N”. It has also been made obtainable to the Banks through web-services so that the whole process can be linked to the Bank’s internal core banking solution and be automated.

Rates Applicable

Bank/Post Office has only to enter the PAN of the person who is withdrawing cash according to the latest stated norms for ascertaining the applicable TDS rate. A message will be immediately displayed on the departmental utility on entering PAN. 

If anyone is withdrawing cash is a non-filer of ITR, it will show: – “TDS is deductible at the ‘rate 2%’ if cash withdrawal exceeds ‘Rs. 20 lakh’ and at the rate of 5% if it exceeds Rs. 1 crore”. Also, if the person withdrawing cash is a filer of ITR, it will show it as: -“TDS is deductible at the rate of 2% if cash withdrawal exceeds Rs. 1 crore”. 

Finance Act 2020    

The persons are withdrawing a considerable amount of cash according to the report stated by data on cash withdrawal by the people who have under no circumstances have filed Income Tax Returns.

 To lower the threshold of cash withdrawal to Rs. 20 lakh for the applicability of this TDS for non-filers, the Finance Act, 2020, w.e.f. 1st July 2020, further amended Income-tax Act, 1961 to keep track of cash withdrawals by the non-filers. It is to ensure filing of return by these persons, and restraint black money. It has also mandated TDS exceeding Rs. 1 crore at a higher rate of 5% on cash withdrawal by the non-filers.

To dispirit cash transactions, and move towards less-cash economy, it must be noted that the Finance (No.2) Act, 2019 had implanted section 194N in the Income-tax Act, 1961, w.e.f. 1st September 2019 on cash withdrawal exceeding Rs. 1 crore from a Bank/Post Office account/s to provide for levy of TDS @ 2% subject to certain exceptions.

Read our article: TDS Returns Filing: Due Dates and Procedure for Filing

Permissions for Refund of TDS which were excessively deposited: Delhi High Court

The Hon’ble Delhi High Court directed refund of excessively deposited TDS (Tax Deduction at Source) in a recent order via Video Conferencing. To remove the technical glitches and enable the TRACES portal, the writ petition was filed seeking a direction to the respondents. The petitioner can file its ‘refund application’ for the additional Tax Deduction at Source (TDS) lifted by it.

Facts of the Matter

Clean Wind Power Kurnool Private Limited was the petitioner in this case. According to the facts of the case, stated that the petitioner deposited “Rs.69, 59,265/” in the direction of TDS. The petitioner was able to adjust/appropriate only “Rs.19, 87,733/” against the said deposit, leaving the outstanding excess untaken deposited amount of “Rs.49, 71,532/”.

Contentions of the Parties

He further contended that, because the online TRACES portal showed ‘Maximum Refund Allowed’ as ‘Nil,’ the petitioner was unable to claim a refund of the unclaimed the excess TDS amount. Moreover, he has stated that it should have appeared under the head’ Maximum Refund Allowed’ instead excess TDS of Rs.49, 71,532/- was publicized in the column of ‘Remaining Available Balance.’

The non-refund of the excess TDS amount deposited was violative of ‘Section 200A’ of the Income Tax Act, 1961 read with ‘Rule 31A(3A)’ of the Income Tax Rules as per the learned counsel for the petitioner. It was also further stated that it was also incompetent with the CBDT Circular “No. 2/2011 dated 27th April 2011”.

Rational and Observation

The verification of the TDS amount utilized and scrutiny has to be manually done according to the established procedure in contracts the learned counsel for the respondents had specified that in the present case. 

Manmohan and Justice Sanjeev Narula was the consisting division bench comprising of Justice, who enabled the procedure placed on record by the respondent. They also placed on record the recognized method to be tracked by the petitioner. At the final discretion, respondents were directed to decide the petitioner’s request within four weeks, and the petitioner agreed to follow the procedure.

Conclusion 

 It is important to be diligent while dealing with it as any negligence may bring huge penalties or unnecessary costs since various Central and State laws are applicable in the case of Income Tax and Tax Deductions at Source (TDS). Our CorpBiz legal group will be at your disposal if you want expert advice on any aspect TDS, Income Tax, Registrations & Permissions, etc. We will help you ensure complete compliance concerning all the requirements based on your desired activities, ensuring the fruitful and well-timed completion of your work.

Read our article: How Form 15G and 15H Helps To Save TDS on Interest Income

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Archita Bhattacharjee

Archita Bhattacharjee is working as Legal Analyst (Team Lead, Research & Development) at Corpbiz and has proving experience about 2 years as Corporate Legal Researcher in law firms as well as Rajya Sabha and authors in diverse publications. She has refined her skills by representing India in Paris, France and the University of Leiden over implications of International Humanitarian and Criminal Law being certified member of many Legal Centers.

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