IT Act – Income Tax Act, 1961 

Income Tax is a department of the Ministry of Finance under the Government of India, it is a direct tax which will be collected from the people based on the income level. The percentage of tax will be made as per the slab rate of the government.  

TDS – Tax Deduction at Source  

Any person or company where the limit if threshold increase tax will be deducted.Tax department will deduct the certain amount of tax from the person based on the limits, so payment made after deduction is stated as TDS. 

Section 194 N of Income Tax Act, 1961

• The New law on TDS on cash withdrawal has come into effect from July 1, 2020.
• As per the amended law, if an individual withdraws cash exceeding Rs 20 lakh in an FY(Financial year) from his/her bank account (current or savings) and has not filed ITR (Income Tax Return)during the last three financial years then TDS will be leviable at the rate of 2% on the amount of cash withdrawn. Further, if the amount of cash withdrawn exceeds Rs 1 crore in the financial year, then TDS at the rate of 5 %  will be applicable on the amount of cash withdrawn in case of the individual who has not filed ITR in the last 3 financial years. 

APPLICABILITY OF THE SECTION 

• Individual person 
• Post office
• Company
• Partnership firm or LLP  
• Co-operative bank 
• Private bank and Public bank 
• Local authority 
• An Hindu Undivided Family 
• An associate of person or Body of Individual 

MERITS AND DEMERITS OF SECTION 194 N 

It has been clearly seen that section 194N cash withdrawal onTDS  is both beneficial as well as harmful depends on the nature of the act

MERITS 

• It is to curb the people trying to cheat the government for tax exemption
• Helps to find the black money withdrawal of the business people to avoid illegal activities 
• No person can transact black money without the knowledge of the government
• No people can take advantage in cash withdrawn where every cash withdrawal needs a proper explanation or to be held liable to pay tax 
• This will reduce the illegal  transaction which will be used by the employer among employees where employees cannot bear the tax for general transactions. 
• We have to keenly look into the factor of the section 194 N it has been clearly mentioned exceeds more than the period of 3 years, so not all the unexpected transactions or the emergency transaction will happen in a series of 3 years only people who have the motive to do illegal behaviour of withdrawal have to pay for it.

DEMERITS 

• It might be a key factor to find the black money simultaneously cannot blame the business people transaction list because where it ultimately affects the basic privacy right of the person. 
• Tax is something which has to be imposed for the income of the person not for the cash withdrawal, cash withdrawal happens in many different circumstances where tax should not be levied on it. 
• So this might lead persons to reduce digital transaction 
• Where it will promote people to do direct transaction in person which leads to increase in storage of black money as well 
• When it comes into the factor of business people used to get large number of transaction where they cannot pay tax for it for example if a person is investing in the buying of any kind of machinery or asset for the company the person is already held liable to pay tax for the particular thing, this is something an additional tax which will be imposed for cash withdrawal. 
• This might also lead to the increased illegal usage of employees’ accounts by the managers or creamy layer of people to hide the transaction and withdrawal process.