Centre may not apply new TDS rules to some sectors

NEW DELHI: The government may exempt certain businesses, particularly those dealing with farmers, from the 2% tax deducted at source (TDS) levied on cash withdrawal of over ₹1 crore annually, two officials aware of the development said.

The levy, introduced in this year’s budget to discourage cash transactions, became applicable from September 1. The 2% TDS will be applicable from day one on all such withdrawals in case of those who have already exhausted the ₹1 crore limit for the financial year 2019-20, the officials cited above said, requesting anonymity.

The officials said the government is considering providing relief to some sectors, which mostly deal in cash.

“Such cases are being reviewed based on the sectoral representations. A considered view will be taken on these matters and some exemption could be provided to businesses, where large amounts of cash payments are inevitable,” said one of the officials.

As per the law, the Union government has the power to exempt certain individuals or certain sectors from TDS in consultation with the Reserve Bank of India (RBI), a second official said.

Spokespersons for the finance ministry and the Central Board of Direct Taxes (CBDT) did not respond to email queries about the possible exemption.

Confederation of All India Traders (CAIT) secretary-general Praveen Khandelwal said traders were facing problems in making payments to farmers, who refuse to accept cheques.

“They also resist the 2% TDS when they are paid in cash. CAIT is expected to meet finance minister Nirmala Sitharaman next week to highlight concerns of the farmers,’’ he said.

Khandelwal said the traders cannot absorb the 2% TDS. “The problems of farmers are also genuine. They come to towns to sell their produce and use cash to purchase essentials, including seeds, fertilisers, and other farm inputs. Villages do not have efficient banking facilities like towns. Therefore, cheque payments are not always a viable option,” he said.

Khandelwal said traders do not otherwise need over ₹1 crore cash annually. “₹1 crore cash [annually] is sufficient for traders to meet their regular cash requirements as most of the payments, including the salary outgo, are not in cash,” he said.