Understanding TDS Deducted Under Section 194N of the Income Tax Act
A Guide for the Sikkimese Community on Cash Withdrawal Tax
-CA Anant Lall Gupta.
What is Section 194N?
Section 194N(mostly shown as 194NF by State Bank of Sikkim and other banks under 26 AS) of the Income Tax Act requires banks and post offices to deduct Tax Deducted at Source (TDS) on cash withdrawals exceeding specified limits. Many members of the Sikkimese community have been affected by this provision and may be eligible for refunds.
When is TDS Deducted Under Section 194N?
TDS is deducted when cash withdrawals from bank accounts exceed Rs. 20 lakh in a financial year for taxpayers who have filed income tax returns for all three preceding assessment years.
For those who have not filed returns for all three preceding years, TDS applies when cash withdrawals exceed Rs. 1 crore in a financial year.
The TDS rate is 2% of the amount exceeding the threshold limit.
For non-PAN or invalid PAN cases, the TDS rate increases to 5%.
Impact on the Sikkimese Community
Many Sikkimese individuals, particularly those dealing in cash-intensive businesses or agricultural income, have experienced TDS deductions on their legitimate cash withdrawals.
The deduction often occurs even when the total income is below the taxable limit or when income is exempt under special provisions.
This has created financial hardship and confusion within the community, especially for those unfamiliar with income tax procedures.
How to Claim Your TDS Refund
Step 1: Determine Which ITR Form to File
ITR-2: File this form if you are an individual or Hindu Undivided Family (HUF) with income from salary, house property, capital gains, or other sources (but not business or profession income).
ITR-3: File this form if you have income from business or profession, along with income from other sources like salary, house property, or capital gains.
Step 2: Gather Required Documents
Form 26AS or Annual Information Statement (AIS) showing TDS deducted under Section 194N
Bank statements showing cash withdrawals
PAN card
Aadhaar card
Income proof documents (salary slips, agricultural income records, business books, etc.)
Step 3: File Your Income Tax Return
Calculate your total taxable income for the financial year.
Include all sources of income and claim applicable deductions.
The TDS deducted will be reflected in Form 26AS and can be claimed as tax credit.
If your total tax liability is less than the TDS deducted, you will receive a refund.
Important Deadlines for Belated Returns
For Assessment Year 2024-25 (Financial Year 2023-24):
Original deadline for filing: July 31, 2024 (already passed)
Last date for filing belated returns: December 31, 2024
Penalty for belated filing: Up to Rs. 5,000 (Rs. 1,000 if total income is below Rs. 5 lakh)
For Assessment Year 2025-26 (Financial Year 2024-25):
Original deadline: July 31, 2025
Last date for filing belated returns: December 31, 2025
Critical Point: You can file belated returns up to December 31 of the relevant assessment year to claim your TDS refund. Missing this deadline means losing your refund permanently.
Special Considerations for the Sikkimese Community
If your primary income is from agriculture, it is generally exempt from income tax, but you must still file a return to claim TDS refunds.
Small business owners and traders should maintain proper books of accounts to support their income declarations.
Senior citizens (60 years and above) have higher basic exemption limits and may be eligible for full refunds.
If you have income below the basic exemption limit (Rs. 2.5 lakh for individuals below 60 years), you can claim a complete refund of TDS deducted.
Steps to Avoid Future TDS Deductions
File your income tax returns regularly for all financial years, even if your income is below the taxable limit.
Maintain proper documentation of income sources, especially for exempt income.
Submit Form 15G (for individuals below 60) or Form 15H (for senior citizens above 60) to your bank if your total income is below the taxable limit.
Plan your cash withdrawals strategically to stay within the threshold limits where possible.
How to Check Your TDS Status
Log in to the Income Tax e-filing portal (www.incometax.gov.in)
Navigate to "View Form 26AS" or "Annual Information Statement (AIS)"
Check for TDS deductions under Section 194N
Verify the amount deducted and the bank's TAN (Tax Deduction Account Number)
Getting Help
If you need assistance with filing returns or claiming refunds:
Contact a local Chartered Accountant or tax consultant familiar with Sikkimese community needs
Visit the nearest Income Tax Help Center or Aaykar Seva Kendra
Call the Income Tax Department helpline: 1800-180-1961
Use the e-filing portal's chatbot for guidance
Key Takeaways
TDS under Section 194N is deducted on cash withdrawals exceeding Rs. 20 lakh or Rs. 1 crore depending on your filing history.
You can claim a full refund if your actual tax liability is lower than the TDS deducted.
File ITR-2 if you have no business income; file ITR-3 if you have business or professional income.
The last date to file belated returns and claim refunds is December 31 of the assessment year.
Don't let your hard-earned money remain with the tax department—file your return before the deadline to claim what's rightfully yours.
Disclaimer: This article provides general information and should not be considered professional tax advice. For specific guidance related to your individual circumstances, please consult a qualified tax professional or Chartered Accountant.
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