From now on, taxpayers can no longer remain non-compliant as banks and post offices can now access the ITR filing status of a customer. A taxpayer’s ITR status can be verified based on his or her Permanent Account Number (PAN).
Section 194N of ITA, 1961 makes it mandatory for post offices and banks to make a tax deduction on cash withdrawals made by any individual if the sum of aggregate withdrawals within a financial year is above Rs.1 crore. Tax will be deducted at the rate of 2% with respect to the amount of cash withdrawal which exceeds Rs.1 crore.
However, in case the individual who made a cash withdrawal hasn’t completed his tax return filing for three previous years, the threshold will be lower, i.e., at Rs.20 lakh. For a non-filer, the TDS rate will be 2% of withdrawals exceeding Rs 20 lakh in a year and 5% on cash withdrawals exceeding Rs.1 crore.
The income tax department mentioned that examination of data from the past few times revealed that many people who withdrew cash in a lump sum, however, did not pay taxes. Due to this reason, post offices and banks have been included under the new rule.
Also Read: Form GSTR-2B is Now Available on GST Portal for Taxpayers
The IT department had already provided post offices and banks with a functionality known as ‘Verification of applicability u/s 194N’ on the income tax e-filing portal since 1st July 2020. Using this functionality, post offices and banks can arrive at the applicable rate of TDS as per Section 194N of ITA, 1961 by keying in the PAN details of an individual who is making a cash withdrawal.
In its recent notification, ‘scheduled commercial banks’ was added to the list of agencies with which tax authorities can share information by the IT department. Also, the IT department has released a new functionality called the “ITR Filing Compliance Check”. This functionality will be available to Scheduled Commercial Banks (SCBs) for checking the IT return filing status of PANs in bulk.
Previously, it was a daunting task for banks and other financial institutions when they had to verify the status of ITR filing of an account holder. An account holder had to submit the proof concerning ITR filing for the previous three financial years to the bank. However, with this new functionality, it’s easy for banks and post offices to check whether a person making a cash withdrawal comes under the expanded provision or not. Above all, thanks to this new feature! There is no way an individual can get away without paying taxes on time.
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Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.