INCOME TAX AND TDS
DEDUCTION OF TDS :
(i). It is the responsibility of every post office for updation of form 15G/15H (if submitted) in every financial year and update correct PAN number in CBS Finacle. Quoting invalid PAN /wrong PAN number may attract penalty u/s 272B of Income Tax Act-1961.
Note: If PAN is not submitted by the Depositor or PAN is not updated in the CBS System by the Post Office, TDS @ higher rate will be deducted.
(ii). As per Section 194(N) of IT Act-1961, TDS in respect of cash withdrawal by an account holder of National Savings Schemes taken together has to be deducted as follows.
(1). In case account holder is Income Tax Return filers, 2% TDS is applicable on all cash withdrawal in excess of Rs 1 crore from 01.09.2019.
(2). In case account holder is non-Income Tax Return filers
(i). If aggregate cash withdrawals exceed Rs. 20 Lakhs, but does not exceed Rs. 1 Crore during a financial year, 2% of TDS on the amount exceeding Rs. 20 Lakhs is applicable from 01.07.2020.
(ii). If aggregate cash withdrawals exceed Rs. 1 Crore during a financial year, 5% of TDS on the amount exceeding Rs. 1 Crore is applicable from 01.07.2020.
As per SB Order No. 2/2020, TDS should be deducted @ 2% of the Cash withdrawals made in excess of Rs.1 crore in a year with effect from 1.9.2019 in respect of all Small Savings Schemes including Certificates put together. This deduction is applicable for the financial year 2019-20 onwards.
Provided that nothing contained in this sub-section shall apply to any payment made to :-
(i) the Government;
(ii) any banking company or co-operative society engaged in carrying on the business of banking or a post office.
(iiil any business correspondent of 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 Act, 1934 ( 2 of 1934);
(iv) any white label automated teller machine operator of a banking company or co- operative society engaged in carrying on the business of banking, in accordance with the authorization issued by the Reserve Bank of India under the payment and Settlement Systems Act, 2007 (51 of 2007);
(v) such other person or class of persons, which the central Government may, be.
Click here for SB Order No. 2/2020SB Order No. 2/2020
Amendment 1:
(For Non-ITR filers)
As per SB Order No. 5/2021, TDS @ 2% for cash withdrawals in excess of Rs.20 lakhs in a year and @5% in excess of Rs.1 crore in a year in case of a recipient who has not filed Income Tax Returns for three previous consecutive years. The procedure of checking the ITR filing status is also explained in the SB Order.
Click here for SB order No. 5/2021.
Amendment 2:
The functionality for deduction of TDS has been deployed in Finacle in various patches on 30.05.2022,22.06.2022 and 04.08.2022. Accordingly, it shall be the responsibility of the post offices concerned to update correct percentage of TDS to be deducted for the depositor concerned, in CBS Finacle System. A detailed SOP to be followed by the post offices is attached to the SB Order. Consequently, CEPT Chennai will not share details of all account holders for whom TDS deduction under Section 194N is applicable, henceforth.. All the Head Post Offices shall continue to file the TDS returns for all the TDS deductions made under Section 194N of IT Act, 1961.
Click here for SB Order No. 18/2022
As per FS division letter No. FS-10/1/2022-FS-DOP dated 26.4.2024, TDS in respect of quarterly interest of SCSS accounts should not be deducted without giving time to the investors for filing Form 15G/15H. Complaints have been received from the investors that TDS was recovered from their SCSS accounts on 1.4.2024 itself before filing Form 15G/15H. In all such cases, the investors should be allowed to file the above forms and if they are found eligible for exemption of TDS, refund should be granted by the Post offices. For this purpose, provision is made in Finacle upto 30.4.2024.
Click here to read FS division letter No. FS-10/1/2022-FS-DOP dated 26.4.2024
As per SB Order No. 6/2025 dated 4.4.2025, the following amendments have been made in the TDS recovery from POSB accounts with effect from 1.4.2025
2.1 "ln section 194A of the lncome-tax Act, in sub-section (3),- (a) in clause (i),-
(i) for the words "forty thousand rupees", wherever they occur, the words "fifty thousand rupees" shall be substituted;
(ii) in sub-clause (d), for the words "five thousand rupees", the words "ten thousand rupees" shall be substituted;
(iii) in the third proviso,-
(A) for the words "forty thousand rupees", the words "fifty thousand rupees" shall be substituted;
(B) for the words "fifty thousand rupees", the words "one lakh rupees" shall be substituted;
2.2. "ln section 80CCA of the lncome tax Act in sub-section (2), after the first proviso, the following proviso shall be inserted and shall be deemed to have been inserted with effect from the 29th August, 2024, namely:- "Provided further that the amount referred to in clause (a) which is withdrawn on or after the 29th August, 2024, shall not be charged to tax in the case of an assessee, being an individual".
2.3 "ln section 194H of the lncome tax Act, in the first proviso, for the words "fifteen thousand rupees", the words "twenty thousand rupees" shall be substituted"
Click here for SB Order No. 6/2025
PAN VERIFICATION IN RESPECT OF DEPOSITORS:
As per Rule 6 of Govt. Savings Promotion General Rules 2018 (GSPR 2018), w.e.f.. 18.12.2019, for opening of any account in Post Of6ce, submission of either PAN Number or Form - 60 is mandatory and if Form - 60 is submitted by the customer, PAN Number is to be submitted by the Depositor without fail, within next six months. If a depositor who has already opened an account prior to the date of notification (GSPR 2018) and has not already submitted his Permanent Account Number, the depositor shall do so within a period of six months from the date of notification (GSPR 2018) and in the event of the failure of the depositor to submit the Permanent Account Number within the specified period of six months, his account shall cease to be operational till the time the depositor submits the PAN Number.
Moreover, even if PAN details are furnished by the depositor, in Finacle, there was no facility to validate the PAN details with reference to NSDL data base and consequently, many such irregular details were rejected by Income Tax authorities when TDS returns were filed causing difficulties to the depositors for getting proper details in Form 26AS.
As per SB Order No. 2/2022, online PAN verification with NSDL data from Finacle has been introduced.
Click here for SB Order No.2/2022 along with Standard Operating Procedure
Amendment to above :
SB Order No. 2/2024:
However, with effect from 01.05.2024, changes have been made with respect to PAN validation. Accordingly, Protean system has been mandated by lncome Tax Department to provide the following responses, which is a regulatory compliance to be met by Department of Posts:
Accordingly, at the time of validation of PAN through CCRC menu or CI\IRC menu in Finacle, the following data/information entered / available in CIF will be sent to Protean System for validation.
i. PAN Number
ii. Name (Concatenation of First Name, Middle Name and Last Name)
iii. Date of Birth
Finacle system will restrict acceptance of PAN in case of :
PAN status from NSDL - other than Existing and Valid
Name - N - Not Matched
Date of Birth - N - Not Matched
PAN will be accepted only if the PAN status is shown as 'E' (Existing and Valid). But even if PAN status is 'E', if other status (Name, DOB, PAN-Aadhar linking) fails, PAN should not be accepted.
Further, it should be ensured that the valid PANs are mandatorily accepted from the depositor on the date of happening of any of the fo[owing events, in accordance with the provisions in Rule 6 of Government Savings promotion General Rules 2018 amended vide notification No. G.S.R. 238(E) circulated vide SB order No. 8/2023 dated 03.04.2023.
(i) the balance at any point of time in the account exceeds fifty thousand rupees; or
(ii) the aggregate of all credits in the account in any financial year exceeds one lakh rupees; or
(iii) the aggregate of all withdrawals and transfers in a month from the account exceeds ten thousand rupees;
Click here for SB Order No. 2/2024
Additional Instructions:
Statement of Financial Transactions (SFT) for the year 2023-24 was submitted centrally by CPRC, Chennai to the Income Tax Department In the said reports, several irregularities have been detected subsequently causing difficulties to our POSB customers. Some of them are as follows:
1. The order of the applicants in a Joint account was entered wrongly in Finacle i.e. the first depositor's name was wrongly entered as second depositor and second depositor's name as first depositor. Due to this the interest income of the first depositor was reported wrongly in the PAN of the second depositor.
2. PAN number was entered wrongly resulting in wrong inclusion of interest income in another PAN.
3. When a minor depositor attains the majority, the changes required to be done at account level were not made. This resulted in inclusion of interest income under the PAN of the Guardian
In order to eliminate such irregularities, the Counter PAs and Supervisors working at Post offices should ensure the following :
(i). At the time of opening or modification of accounts in Finacle CBS, all the KYC details viz. PAN number, Aadhaar Number etc and the order of the applicants (depositors) should be entered in Finacle CBS carefully without any mistake and typographical errors, in accordance with the KYC documents and Account Opening Form submitted by the Depositor(s).
(ii). Whenever any minor depositor attains the majority, the procedure as prescribed in Note 1 under the para 14(3) of POSB CBS Manual (Corrected up to 31.12.2021) should be followed properly. Accordingly, whenever any minor depositor attains the majority, changes in Finacle CBS should be made in CMRC menu option and in the account modification option.
For details click here for Department of Posts, FS Division letter No. CPRC/16-1/2024 dated 13.8.2024
