In July of last year, the government released a new rule under the Income Tax Act. If an individual withdraws money from small savings schemes such as public provident fund (PPF), post office deposits, recurring deposit, or national savings certificate, he or she is responsible to pay TDS (tax deducted at source) at the rate of 2-5 per cent if the individual has not submitted ITR in the previous three years, according to Section 194N of the Income Tax Act. TDS will be deducted u/s 194N at 2% if an individual withdraws more than Rs 20 lakh but does not surpass Rs 1 crore from all post office schemes, including PPF or 5 per cent if the amount exceeds Rs 1 crore if the individual has not submitted income tax returns (ITR) for the preceding three assessment years.
The rates and thresholds are determined by whether or not the individual withdrawn money has submitted an ITR in the three previous appraisal years for which the filing ITR deadline has ended. TDS is not deducted for cash withdrawals up to Rs 1 crore in a year if you have submitted an ITR for any of these three assessment years, and TDS is deducted at a rate of 2% for cash withdrawals above Rs 1 crore. TDS regulations apply to cash withdrawals from banks, co-operative banks, and post offices. But even if you submit Form 15H/G, a statement that your income is below the exempted cap, you won't be able to avoid paying TDS. TDS is withheld at the depositor's Post Office, and the account holder is informed in writing. The liable postmaster is entirely responsible for TDS deduction in accordance with the act since it is a legal obligation. TDS non-deduction can result in a penalty or a recovery, depending on the situation.