Say cooperatives who believe it will indirectly affect farmers as they pay them in cash and will have to charge TDS
The 2% Tax Deduction at Source (TDS) on cash withdrawal exceeding Rs 1 crore per annum, that is now applicable, is back door Income Tax on farmers, said representatives of cooperative societies in the state.
They said that cooperative societies have to pay to farmers in cash and that amount exceeds Rs 1 crore, so cooperatives will have to pay TDS, which will be indirect loss to the farmers. However, a top tax expert said that there is an exemption list and if such categories are included in the list, they will be exempt from TDS. A top official in a Public Sector Bank (PSB) also said that TDS provision applies to a bank account, whether it is of individual, a company or a cooperative society.
According to a notification by Central Board of Direct Taxes (CBDT), cash withdrawal beyond Rs 1 crore from bank accounts will face a TDS of 2% and is applicable from September 1, 2019. The move has irked farmers bodies and cooperative societies.
"Cooperative bodies work on no profit – no loss basis. Surplus funds are distributed among members at the end of the year. Of the 32 villages our cooperative caters to, banking facilities are available in just about five villages. We have no option but to pay in cash. The ceiling of Rs 1 crore is very less," said Jayesh Patel, chairman of The Pal Group Cotton Sale Society in Surat district. The society has an annual turnover of about Rs 100 crore and caters to close to 4,000 farmers. He said that contrary to the announcement of doubling farmers' income by 2022, the move to impose TDS will actually reduce their income.
Sagar Rabari, founder president of Gujarat Khedut Ekta Samiti said that there have been instances of cheques by traders in Modasa being dishonoured recently and farmers had to run from pillar to post to get their money. He suggested that incomes related to farming, cattle rearing and fisheries should be exempt from TDS. Representatives in districts like Ahmedabad are not concerned as bank branch network is well established here. Rajbha Chudasama, chairman of Khunseva Sahkari Mandali in Dholera told DNA that even a basic cooperative has a turnover over of Rs 4-5 crore extending upto Rs 20 crore. "There are 56 cooperatives in Dhandhuka taluka and 540 cooperatives in Ahmedabad district. But all the farmers have bank accounts, so we transfer funds to their bank accounts and they can withdraw in cash, which will not be above Rs one crore per farmer," said Chudasama.
Close to 28,000 farmers are members of 56 cooperatives in Dhandhuka taluka. A leading tax practitioner in the city said that as per the notification, individuals, Hindu Undivided Families, companies, Limited Liability Partnerships, Association of Persons, Body of Individuals or any organisation involved in banking will face TDS if the annual cash withdrawal exceeds Rs one crore. However, organisations, whose income is exempt from tax will not have to pay TDS on cash withdrawals, he explained.
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