FA, 2020 amendment increasing...
In order to discourage cash transactions and move towards a cashless economy, Section 194N of the Income-tax Act 1961 (ITA) Vide Finance (No 2) Act 2019, which mandates tax withholding on cash withdrawal above the prescribed threshold.
It is interesting to note that the Finance Minister during the Budget speech of 2019 had mentioned the reason for the introduction of Section 194N was to discourage business payments in cash, however, the Finance Act mandates tax withholding on cash withdrawal from all types of bank accounts including from accounts maintained with the Post Office and Co-operative society viz., savings account, current account or any other kind of account.
However, payments for business are generally made from 'Current Accounts' – it seems to be a minor inconsistency there.
Furthermore, the Finance Act 2020 amended the said Section in order to curb black money and keep a record of persons who did not file their income tax returns; and are in the habit of withdrawing large sums of money during a tax year.
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