Thursday, September 5, 2019
As of September 1, 2019, India introduced an obligation for tax to be deducted at source at a two percent rate if a taxpayer's cash withdrawals totaled INR10m (USD138,350) or more in the previous year.
The Government has clarified that the obligation to withhold tax does not apply to transactions taking place prior to September 1, 2019, following queries from taxpayers. However, for the purposes of calculating whether the obligation to deduct tax at source applies, taxpayers' transactions from April 1, 2019, should be taken into account.
The Government said if a person has already withdrawn INR10m or more in cash up to August 31, 2019, during the period from April 1, 2019, from one or more accounts maintained with a banking company or a cooperative bank or a post office, the two percent tax deduction at source will apply on all subsequent cash withdrawals.
The measure, introduced in the Finance (No. 2) Act, 2019, is intended to tackle the black economy and discourage businesses from using cash. The obligation to deduct tax at source applies to a banking company, cooperative bank, or post office.