eCircular

Department: FINANCIAL REPORTING AND

TAXATION
Sl.No.: 1153/2019 - 20
Circular No.: CFO/FRT-TAX/8/2019 - 20
Date: Fri 15 Nov 2019

All the Branches /LHOs/SBUs/Offices/CC establishments of

State Bank of India
TAX/ FRT/CC/PM/317

14th November 2019

Dear Sir,

SECTION 194N- TDS ON CASH WITHDRAWALS EXCEEDING RUPEES ONE

CRORE UNDER FINANCE (NO. 2) ACT, 2019

A new Section 194N has been introduced by Finance Act (No. 2) 2019. The Section
requires the Bank to deduct Income-tax @ 2% on cash withdrawals by all channels in
excess of rupees one crore by one customer (PAN) during a Financial Year. These
provisions are applicable w.e.f. 01.09.2019. However, Income-tax deduction will not be
made on cash withdrawal made by following entities: -

(i) The Government;

(ii) any banking company or co-operative society engaged in carrying on the
business of banking or a post office;
(iii) any business correspondent of a banking company or co-operative society
engaged in carrying on the business of banking, in accordance with the
guidelines issued in this regard by the Reserve Bank of India under the
Reserve Bank of India Act, 1934 (2 of 1934);
(iv) any white level automated teller machine operator of a banking company or
co-operative society engaged in carrying on the business of banking, in
accordance with the authorisation issued by the Reserve Bank of India under
the Payment and Settlement Systems Act, 2007 (51 of 2007);
(v) Reserve Bank of India (RBI)
(vi) a corporation established by or under a Central Act which is, under any law
for the time being in force, exempt from income-tax on its income
(vii) a Mutual Fund specified under clause (23D) of section 10

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(Based on above exempted list of entities, the customer type identified in CBS are given
in Annexure 1)

2. Besides the above entities, cash withdrawals by the following entities fulfilling the
conditions specified in Annexure 2 are also exempt from deduction of Income-tax at
Source: -

a. Cash Replenishment Agencies (CRA’s) and franchise agents of White

Label Automated Teller Machine Operators (WLATMO’s)

b. Commission agents or traders, operating under Agriculture Produce

Market Committee (APMC) and registered under any Law relating to
Agriculture Produce Market of the concerned State

c. the authorised dealers in Foreign Exchange (AD) and its franchise agents
and sub-agent; licensed by the RBI

d. Full-Fledged Money Changer (FFMC) licensed by the RBI and its

franchise agent

3. GITC is developing a functionality for auto deduction of TDS u/s 194N at the time
of transaction itself. However, in the interim (as the Bank is liable for deduction of TDS
from 1.09.2019),

a. The amount of tax liability is being calculated and deposited with Government by
FRT on the basis of data provided by the GITC after excluding customers and
accounts eligible for exemption as provided by Circles/BUs/NBG-Ops. For
manually marking exemption of the accounts of entities specified in para 2
above, the branches should provide the details of such accounts with a certificate
to the Circle about the compliance of stipulations (In format specified in Annexure
3). The Circles shall send a consolidated request for exemption to Operations-
R&DB deptt. (C-TDS) at Corporate Centre for non-deduction of TDS, for onward
submission to FRT deptt. The branches should provide the details to the circles
by 3rd of following month and the circles should consolidate and provide the

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 details to Operations-R&DB deptt. (C-TDS) at Corporate Centre by 5 th of
following month.

b. To recover the TDS amount from the customer accounts, trickle feed is being run
at the back end on periodical intervals. The Circles/Branches should ensure that
adequate funds are available in customer accounts to ensure recovery of taxes.

4. The detailed operating instructions in this regard are enclosed as Annexure 4.

The Branches are advised to ensure strict adherence of the same.

Yours faithfully,

(Sandeep Ubale)
Chief General Manager (FR&T)
Encl: As above.

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 Annexure 1

Customer Types exempted from TDS u/s 194N

SN Customer_Tier_type DESCRIPTION
1 20101 NON PERSONAL-GOVERNMENT-CENTRAL
2 20102 NON PERSONAL-GOVERNMENT-STATE
NON PERSONAL-GOVERNMENT-FOREIGN-
3 2010301
EMBASSIES
NON PERSONAL-GOVERNMENT-FOREIGN-
4 2010302
OTHERS
5 212 NON PERSONAL-JUDICIARY
6 21301 NON PERSONAL-BANKS-FOREIGN
NON PERSONAL-BANKS-DOMESTIC-
7 2130201
COOPERATIVES
NON PERSONAL-BANKS-DOMESTIC-PUBLIC
8 2130202
SECTOR
NON PERSONAL-BANKS-DOMESTIC-PRIVATE
9 2130203
SECTOR
NON PERSONAL-BANKS-DOMESTIC-LOCAL AREA
10 2130204
BANKS
NON PERSONAL-BANKS-DOMESTIC-REGIONAL
11 2130205
RURAL BANKS
NON PERSONAL-BANKS-DOMESTIC-OTHER
12 2130206
GOVT.OWN BANKS
NON PERSONAL-BANKS-DOMESTIC-OTHER
13 2130207
BANKS
PERSONAL(INDIVIDUAL) -BUSINESS
14 10223
CORRESPODENT
15 221 NON PERSONAL -BUSINESS CORRESPODENT
16 222 NON PER : OFFICE A/C(INTERNAL)
17 21707 MULTILATERAL BODIES (BIS, IMF,MDB)
18 21303 NON-SCHEDULED BANK
19 2130208 Central Scheme of Int Subsidy on Edn Loans for EWS
20 215 NON PERSONAL-WHITE LABEL ATM VENDOR
NON PERSONAL-QUASI GOVERNMENT-LOCAL
21 20201
BODIES

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 Annexure 2

ACCOUNT LEVEL EXEMPTION OF FOLLOWING ENTITIES MAY BE GIVEN

SUBJECT TO FULFILLING THE CONDITIONS SPECIFIED BELOW

I. Accounts of Commission agents or traders, operating under Agriculture

Produce Market Committee and registered under any Law relating to
Agriculture Produce Market of the concerned State
Stipulated conditions
1. Valid PAN is available in the CIF and if not, then valid PAN is obtained from these
entities and updated in the CIF
2. Such entities should be operating under APMC and be Registered under any Law
relating to APMC of concerned State
3. Letter from customer specifying the Account No. through which the customer
wishes to withdraw cash in excess of Rs. 1 Crore.
4. Certificate from the customer that cash is withdrawn from account only for the
purpose of making payments to Farmers on account of purchase of Agriculture
produce (Draft format given hereunder)
5. Necessary evidences mentioned above need to be collected and placed on record
before extending exemption of non-deduction of TDS
6. Since, the account level exemption is extended and hence the Branch should not
permit any other cash withdrawal from the said specified account.
7. While documents listed at Sr. no. 1 to 3 is required to be taken only once, the
document listed at Sr. no. 4 is required to be obtained every time customer wishes
to withdraw the cash from the specified account.

II. Cash Replenishment Agencies (CRA’s) and franchise agents of White Label
Automated Teller Machine Operators (WLATMO’s) maintaining a separate bank
account from which withdrawal is made only for the purposes of replenishing
cash in the Automated Teller Machines (ATM’s) operated by such WLATMO’s.
Stipulated conditions
1. Valid PAN is available in the CIF and if not, then valid PAN is obtained from these
entities and updated in the CIF
2. Obtain a certificate from WLATMO certifying the details like Name and PAN of
CRA and Franchise Agents
3. Obtain a certificate from such CRA and franchise agents that withdrawals from
their account would be made only for the purpose of replenishing cash in ATMs
operated by WLATMOs.

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 4. Monthly certificate to be obtained from WLATMOs certifying that cash withdrawn
from the accounts linked with the CIF of CRAs and franchise agents of WLATMOs
matches with cash deposited in ATMs of WLATMOs (Draft format given
hereunder).
5. Necessary evidences mentioned above need to be collected and placed on record
before extending exemption of non-deduction of income-tax
6. Since, the account level exemption is extended and hence the Branch should not
permit any other cash withdrawal from the said specified account.
7. While documents listed at Sr. no. 1 to 3 is required to be taken only once, the
document listed at Sr. no. 4 is required to be obtained every time customer wishes
to withdraw the cash from the specified account.

III. Accounts related to:

(a) the authorised dealer (AD) in foreign exchange and its franchise agent and sub-
agent; and
(b) Full-Fledged Money Changer (FFMC) licensed by the Reserve Bank of India and
its franchise agent;
Stipulated conditions
1. Valid PAN of AD, its franchise agent and sub-agent as well as FFMC and its franchise
agent is available in the CIF and if not, then valid PAN is obtained from these entities
and updated in the CIF
2. Obtain a certificate from AD certifying the details like Name and PAN of its franchise
agents and sub-agents along with designated account no. of AD, its franchise agents
and sub-agents, which will be used exclusively for the purposes mentioned in para 4
below.
3. Obtain a certificate from FFMC certifying the details like Name and PAN of its
franchise agents along with designated account no. of FFMC, its franchise agents
and sub-agents, which will be used exclusively for the purposes mentioned in para 4
below.
4. Obtain a certificate from AD and their franchise agent and sub-agent, and the Full-
Fledged Money Changers (FFMC) and their franchise agent that separate bank
account from which cash withdrawal is made is used only for the purposes of-
a. purchase of foreign currency from foreign tourists or non-residents visiting India
or from resident Indians on their return to India, in cash as per the directions or
guidelines issued by Reserve Bank of India; or

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 b. disbursement of inward remittances to the recipient beneficiaries in India in
cash under Money Transfer Service Scheme (MTSS) of the Reserve Bank of
India;
5. Obtain a certificate from AD and their franchise agent and sub-agent, and the Full-
Fledged Money Changers (FFMC) and their franchise agent that cash withdrawal
made from the specified account is used only for the purposes specified above and
the directions or guidelines issued by the Reserve Bank of India have been adhered
to. (Draft format given hereunder)
6. Necessary evidences mentioned above need to be collected and placed on record
before extending exemption of non-deduction of income-tax
7. Since, the account level exemption is extended, the Branch should not permit any
other cash withdrawal from the said specified account.
8. While documents listed at Sr. no. 1 to 4 is required to be taken only once, the
document listed at Sr. no. 5 is required to be obtained every time customer wishes to
withdraw the cash from the specified account.

Monthly certificates are required to be obtained latest by 3rd of the next month. The Circle
should confirm to Operations-R&DB deptt. (C-TDS) at Corporate Centre that the
concerned branches are in possession of the onetime documents as well as monthly
certificates.

All these documents should be kept safely by the branches for next 8 years from the end
of the financial year to which they pertain, in such a manner that the same can be
produced before the income-tax authorities as and when required.

Draft Certificate
(For Commission agents or traders, operating under Agriculture Produce Market
Committee exempt in accordance with Notification No. 70/2019 dated 20th September,
2019)
This is to certify that we are operating as a commission agent or trader and are duly
registered under APMC Act of _________ State and is assessed under Income Tax Act,
1961 having PAN ______ and the cash withdrawals made by us from the Account
No._______ maintained with State Bank of India, _________ branch during the month of
xxxx, 2019 have been used for the purpose of making cash payment to farmers on
account of purchase of agricultural produce and for no other purposes.
We confirm that that the statement made above is true and correct and in case the
statement is found to be incorrect, either wholly or in part, then we shall be solely liable
for the consequences thereof including interest and penalty that the income-tax
department may levy on the State Bank of India.

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In such situation, we shall make payment to the State Bank of India immediately upon the
demand is made by the SBI without waiting for the result of any litigation. We shall keep
SBI fully indemnify against all demands and cost that the SBI may have to incur by placing
the reliance of this certificate.
Draft Certificate
(To be furnished by the While Label ATM operators in respect of accounts maintained by
CRA/franchise agents engaged by such While Label ATM operators-In accordance with
Notification No. 68/2019 -)
This is to certify that __________ a franchise agent / CRA engaged by us under
agreement dated _____ and is assessed under Income Tax Act, 1961 having PAN
______is maintaining a current account with State Bank of India ________ Branch being
account No. _______ and that the said account is utilised for withdrawal of cash by the
above franchise agent / CRA for replenishment in the ATM operated by us and the cash
withdrawn from the said account during the period _____ to _____ (one month) was
entirely utilised for cash replenishment of the said ATM.
It is further certified that we have scrutinised the transactions in the above account and
have reconciled the withdrawals of cash from the above account with the amount of cash
deposited in the said ATM.
We confirm that that the statement made above is true and correct and in case the
statement is found to be incorrect, either wholly or in part, then we shall be solely liable
for the consequences thereof including interest and penalty that the income-tax
department may levy on the State Bank of India.

In such situation, we shall make payment to the State Bank of India immediately upon the
demand is made by the SBI without waiting for the result of any litigation. We shall keep
SBI fully indemnify against all demands and cost that the SBI may have to incur by placing
the reliance of this certificate.
Draft Certificate
(For the authorised dealer and its franchise agent and sub-agent; and Full-Fledged
Money Changer (FFMC) licensed by the Reserve Bank of India and its franchise agent -
In accordance with Notification No. 80/2019 dated 15th October 2019)
This is to certify that we are licensed by RBI as Authorised Dealer / Full-Fledged Money
Changer/Franchise agent of Authorised Dealer/ Franchise agent of Full-Fledged Money
Changer/Sub-agent of Authorised Dealer and are maintaining account No.______ with
______ branch ……… and is assessed under Income Tax Act, 1961 having PAN ______.
The said account is used for exclusively for the purpose of as stated herein below:-
(i) Purchase of foreign currency from foreign tourists or non-residents visiting India
or from resident Indians on their return to India, in cash as per the directions or
guidelines issued by Reserve Bank of India; or

(ii) Disbursement of inward remittances to the recipient beneficiaries in India in

cash under Money Transfer Service Scheme (MTSS) of the Reserve Bank of
India;

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That we have complied with the directions of Reserve Bank of India issued for Authorised

Dealers and Money changers with respect of the above activities.

We confirm that that the statement made above is true and correct and in case the
statement is found to be incorrect, either wholly or in part, then we shall be solely liable
for the consequences thereof including interest and penalty that the income-tax
department may levy on the State Bank of India.

In such situation, we shall make payment to the State Bank of India immediately upon the
demand is made by the SBI without waiting for the result of any litigation. We shall keep
SBI fully indemnify against all demands and cost that the SBI may have to incur by placing
the reliance of this certificate.

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 Annexure 3
State Bank of India
Circle………………….
Details of Accounts to be exempted from TDS on Cash Withdrawal u/s 194N for Month of _________

Monthly
Exemption
TDS Amount Reasons for
Sr No Branch Circle CIF Account No NAME PAN Certificate
(if available) Exemption
Code obtained
(Yes/No)

Note: -
1. Data submitted in any other format will not be accepted and would be rejected.
2. The branches should provide the details to the circles by 3rd of following month and the circles should consolidate and
provide the details to Operations-R&DB deptt. (C-TDS) at Corporate Centre by 5th of following month.

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 Annexure 4
Operating Instructions
(on basis of CGM -OPS Letter No R&DB/OPS/C-TDS/2019-20/RU/71 Dated 18th October 2019)
1. In a large number of CIFs customer name is incomplete and/or 'customer type' is incorrect. This has led to 'High' TDS on apparently
many exempt CIFs. On the other hand, TDS has not been calculated on a few unexempt CIFs wrongly opened in State Government
/Central Government/ Bank/ Internal account/Business correspondent (BC) etc. customer types. In many CIFs TDS @20% of
withdrawal amounts has been calculated as PAN numbers were not fed. FRT deptt. is debiting these customer’s accounts with the
TDS amount so calculated on the basis of customer Types and availability/non-availability of PAN. This will result in:
a) Large number of customer complaints from Govt. Authorities/banks/high value customers.
b) Demand/Penalty notices from Income Tax department.

2. To avoid this situation, please arrange verification of all such CIFs and carry out necessary amendment in customer names and
customer types as per KYC documents.

3. For your ready reference and necessary action, details of common discrepancies observed in names/customer types of customers,
implications and required action to be taken is given hereunder

SN Status as revealed from the report Implication Action to be taken

1 Exempted customer’s CIF [Govt., Post a) TDS deduction in exempted CIFs may CIF types to be amended to related
Office, Bank, Business Correspondence lead to customer complaints. exempted category. List attached as
(BC) etc] opened in non-exempted b) Refund process is time consuming Annexure -1.
customer Tier types like personal, exercise and generally takes months in
company, HUF etc. completing the process.
c) Reputational risk and business loss to
the Bank.
2 Non-exempted customer’s CIFs a) Non-deduction of TDS in non-exempted Such type of CIF needs to be amended to
[Personal/public/Company CIFs etc.] CIFs is non-compliance of Section unexempted category.

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 opened under exempted customer types 194N of IT Act and may attract
i.e. State Govt/Central Govt/ Business penal/regulatory action.
Correspondence (BC). b) Reputational loss to the bank.
3 Branch/BGL/intermediary/Parking a) TDS may be deducted in these CIFs. All such Branch/ BGL/ intermediary
accounts opened under other than b) Non-compliance to Bank’s instructions. /Parking accounts to be reviewed and CIF
designated customer tier types i.e. c) Possible lapses in control/checks types to be amended to related
branch account opened in Pvt. Ltd Co. leading to designated category for authorised
customer type. fraud/suspicious/unauthorised accounts.
transaction.
4 Incomplete customer/account names in a) May invite scrutiny by Income Tax CIF/account names to be
CBS. Deptt. amended/completed as per the KYC
5 CIFs in the name of places, branches, b) Misleading names makes process of documents.
branch code etc. customer type identification very
difficult.
c) Lack of control/suspicious transactions.
6 Business Correspondent (BC) accounts a) TDS deduction in exempted CIFs. CIF types to be amended to related
opened in customer tier types other than- b) Non-compliance to Bank’s instructions. category.
10223: PERSONAL(INDIVIDUAL) - c) Customer complaints.
BUSINESS CORRESPODENT
221: NON-PERSONAL - BUSINESS
CORRESPODENT

7 Other individual/non-personal customer a) Non-deduction of TDS in non- CIF types to be amended to related non-
CIFs opened in customer Tier Types exempted CIFs is non-compliance to exempted category.
related to Business Correspondent (BC) Section 194N of IT Act and may attract
i.e. 10223 and 221. penal action.
b) Reputational loss to the bank.
8 CIFs opened in customer Tier Types a) Non-deduction of TDS in non-exempted a) Names to amended accordingly and
related to Business Correspondent (BC) CIFs is non-compliance to Section 194N should reflect activity of Business
i.e. 10223 and 221 but name is not of IT Act and may attract penal action. Correspondent (BC).
indicating Business Correspondent (BC). b) Reputational loss to the bank.

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 b) If CIFs wrongly opened under Business
Correspondent (BC) customer tier types,
it should be amended immediately.
# FI Deptt to issue suitable guidelines
to branches.
9 PAN not available in a large number of a) TDS deduction will be @20% in place PAN to be obtained and fed in all these
CIFs in the names of Pvt/Pub Ltd of applicable rate of 2%. CIFs in CBS.
companies, partnership firm and other b) CIFs related to company/partnership
high-risk customers. firms is non-compliance to Income
Tax/PMLA guidelines and may attract
penal action.
10 Cash withdrawals in suspicious, nominal, Possibilities of misusing of these CIFs for All the CIFs/accounts to be scrutinised
parking accounts. violating KYC/AML norms. urgently and necessary amendment in
customer name/CIF types to be made.
11 Pending deduplication of CIFs: a) Cash withdrawals from remaining CIFs All these CIFs to be verified to identify
may not be considered for TDS pending CIFs for deduping and
calculation for pending dedup CIFs. deduplication to be completed
b) Non-deduction of TDS in non- immediately.
exempted CIFs is non-compliance of
Section 194N of IT Act and may attract
penal action.
c) Reputational loss to the bank.
12 Accounts of Commission agents or TDS deduction in exempted Accounts may Till creation of a specific product/account
traders, operating under Agriculture lead to customer complaints. type by concerned BU through specific IT
Produce Market Committee, which meets Development, please provide the details
the criteria listed above of such accounts with a certificate from the
Circle about the compliance of stipulations
and consolidated request be sent to C-
TDS Deptt for non-deduction of TDS
through Circles/BUs, for onward
submission to FRT deptt.

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13 Cash Replenishment Agencies (CRA’s) TDS deduction in exempted Accounts may Till creation of a specific product/specific
and franchise agents of White Label lead to customer complaints. account level flag by concerned BU
Automated Teller Machine Operators through specific IT Development, please
(WLATMO’s) maintaining a separate provide consolidated details of such
bank account from which withdrawal is accounts with PAN and a certificate from
made only for the purposes of the Circle that such accounts are
replenishing cash in the Automated Teller complying with the stipulated conditions to
Machines (ATM’s) operated by such C-TDS Deptt for non-deduction of TDS
WLATMO’s, which meets the criteria through Circles/BUs, for onward
listed above. submission to FRT Deptt.
14 CIFs related to: TDS deduction in exempted Accounts may Till creation of a specific product/specific
(a) the authorised dealer and its franchise
lead to customer complaints. account level flag by concerned BU
agent and sub-agent; and through specific IT Development, please
(b) Full-Fledged Money Changer (FFMC) provide the details of such accounts with
licensed by the Reserve Bank of India PAN and a certificate from the Circle that
and its franchise agent; , which meets the such accounts are complying with the
criteria listed above stipulated conditions to C-TDS Deptt for
non-deduction of TDS through
Circles/BUs, for onward submission to
FRT Deptt.
15 CIFs related to corporation established TDS deduction in exempted Accounts may Till creation/identification of a specific
by or under a Central Act which is, under lead to customer complaints. product/specific account level flag by
any law for the time being in force, concerned BU through specific IT
exempt from income-tax on its income. Development, please provide the details
of such accounts with PAN and a
certificate from the Circle that such
accounts are complying with the stipulated
conditions to C-TDS Deptt for non-
deduction of TDS, for onward submission
to FRT Deptt.

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16 CIFs related to Foreign embassies a) TDS deduction in CIFs if not opened All these CIFs to be identified and
under exempted categories u/s customer tier type be amended if not
194N. opened under exempted category.
b) Customer complaints.
17 CIFs related to local bodies-Govt. a) TDS deduction in CIFs if not All these CIFs to be identified and
accounts like: opened under exempted categories customer tier type be amended if not
• Panchayat referred to in clause (d) of u/s 194N. opened under exempted category - “NON-
the article 243 of the Constitution of b) Customer complaints. PERSONAL-QUASI GOVERNMENT-
India LOCAL BODIES (Code: 20201)”
• Municipality as referred to in clause
(e) of the article 243P of the
Constitution of India,
• Municipal committee, district board
legally entitled to, or entrusted by the
Government with the control or
management of a municipal or local
fund
• Cantonment Board.

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