The Central Board of Direct Taxes ( CBDT ) issued Notification No. 123/2024/F. No. 275/39/2021-IT(B) announcing that foreign consulates, United Nations agencies, and other international organizations in India will no longer have to follow certain tax rules related to cash withdrawals. This new rule will start on December 1, 2024. The Ministry of Finance clarified that Section 194N of the Income Tax Act, 1961 which requires banks to deduct Tax Deducted at Source ( TDS ) on large cash withdrawals will not apply to these entities. These organizations are already exempt from taxes in India because of international agreements.

This decision applies to: Diplomatic missions. United Nations agencies. International organizations. Foreign consulates. Honorary consulates. These groups are exempt from paying taxes in India under laws such as the Diplomatic Relations (Vienna Convention) Act, 1972, and the United Nations (Privileges and Immunities) Act, 1947. Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here Section 194N was introduced in 2019 to discourage excessive cash usage and promote digital transactions.

It requires banks (private, public, or cooperative) and post offices to deduct TDS on cash withdrawals above certain limits: Rs. 20 lakh: If the account holder has not filed income tax returns (ITRs) for the last three years. Rs. 1 crore: If the account holder has filed ITRs for at least one of the last three years. The rates for TDS under Section 194N are: 2% for withdrawals above Rs. 1 crore if ITRs have been filed. 2% for withdrawals between Rs. 20 lakh and Rs. 1 crore and 5% for withdrawals above Rs. 1 crore if ITRs have not been filed. Get a Handbook on TDS Including TCS as Amended up to Finance Act 2024, Click Here

Section 194N applies broadly to some entities that are exempt from its provisions. These include Central and state governments, Public and private sector banks, Cooperative banks and post offices, Business correspondents of banks, Operators of white-label ATMs, Authorized dealers and money changers licensed by RBI, Traders operating under Agriculture Produce Market Committees ( APMCs ) With this new notification, foreign consulates, diplomatic missions, UN agencies, and international organizations join the list of exempted entities. To Read the full text of the Notification CLICK HERE