Section 194N of the Income Tax Act deals with TDS on cash withdrawals exceeding prescribed limits from banks, cooperative banks, or post offices. If your total cash withdrawals in a financial year cross ₹20 lakh or ₹1 crore, TDS will be deducted based on your ITR filing status. This provision was introduced to discourage large cash transactions and promote digital payments.
TDS on Cash Withdrawal Under Section 194N – Complete Guide (2025)
1) Who Needs to Deduct TDS Under Section 194N and at What Rate?
Under Section 194N of the Income Tax Act, TDS (Tax Deducted at Source) is applicable when cash withdrawals exceed certain limits in a financial year.
The following institutions must deduct TDS when making such payments:
- Banks (including those under Section 51 of the Banking Regulation Act, 1949)
- Co-operative banks
- Post offices
TDS must be deducted if a person withdraws more than ₹1 crore in cash in a financial year from one or more accounts with that bank, co-op bank, or post office.
Exception: If the person withdrawing cash is a co-operative society, the TDS limit is ₹3 crore instead of ₹1 crore.
2) When Is TDS under Section 194N Deducted on Cash Withdrawals ?
TDS under Section 194N must be deducted at the time the cash is paid out to the account holder.
3) What are The TDS rate if Taxpayers do Not File Income Tax Returns ?
If a person has not filed income tax returns for the last 3 years, and the due date to file those returns under Section 139(1) has already passed, a lower threshold and higher TDS rates will apply on cash withdrawals.
In such cases, if the person withdraws more than ₹20 lakhs in cash in a financial year, TDS under section 194N will be deducted as follows on Cash withdrawals:
- 2% TDS on cash withdrawals from ₹20 lakhs to ₹1 crore
- 5% TDS on cash withdrawals above ₹1 crore
This rule applies to withdrawals from banks, co-operative banks, and post offices
Note:
The Central Government, in consultation with the RBI, can notify certain recipients who may be excluded from this provision or have a reduced TDS rate, subject to conditions mentioned in such notification.
4) Who Is Exempt from TDS on Cash Withdrawals Under Section 194N?
TDS under Section 194N does not apply to cash withdrawals made by the following entities:
- The Government
- Banks or co-operative banks
- Post offices
- Business correspondents of banks or co-operative banks (as per RBI guidelines)
- White label ATM operators authorized by the RBI under the Payment and Settlement Systems Act, 2007
Additionally, the Central Government, in consultation with the RBI, can notify other recipients who may be:
- Fully exempt from TDS, or
- Subject to a reduced TDS rate.
based on specific conditions outlined in the notification
5) Example of TDS on Cash Withdrawals Under Section 194N
| Sr. No. | Person Making Withdrawal | Bank/Co-operative Bank | Date of Withdrawal | Amount Withdrawn | TDS Calculation & Amount |
| 1 | Mr Harshit | SBI | 01-07-2024 | 1,10,00,000 | `(10,00,000) x 2% = 20,000 |
| 2 | Mr Rohit | SBI | 01-08-2024 | 90,00,000 | Nil (withdrawal < ₹1 crore) |
| 3 | ABC Co-operative Society | SBI | 01-09-2024 | 2,70,00,000 | Nil (withdrawal < ₹3 crore for co-op societies) |
| 4 | XYZ Co-operative Society | MNO Co-operative Bank | 01-09-2024 | 3,10,00,000 | (10,00,000) x 2% = 20,000 |
| 5 | Mr Kohli | MNO Co-operative Bank | 01-09-2024 | 2,10,00,000 | (1,10,00,000) x 2% = 2,20,000 |
| 6 | A Ltd. | MNO Co-operative Bank | 01-10-2024 | 1,05,00,000 | (5,00,000) x 2% = 10,000 |
| 7 | M/s. DEF & Co., a firm (Non-filer) | MNO Co-operative Bank | 01-02-2025 | 90,00,000 | (70,00,000) x 2% = 1,40,000 |
| 8 | Mr. Dhoni (Non-filer) | BOI | 01-02-2025 | 1,20,00,000 | (80,00,000) x 2% + (20,00,000) x 5% = 2,60,000 |
| 9 | Mr. Bumrah (Non-filer) | BOI | 01-02-2025 | 45,00,000 | (25,00,000) x 2% = 50,000 |
| 10 | PQR Co-operative Society (Non-filer) | BOI | 01-02-2025 | 3,30,00,000 | (2,80,00,000) x 2% + (30,00,000) x 5% = 7,10,000 |
6) Notes to Simplify Understanding of section 194N on Cash Withdrawal
From the above examples, it’s clear that TDS under Section 194N depends on two key factors, whether the person has filed income tax returns for the past 3 years and the amount withdrawn in cash.
For regular taxpayers who file returns on time, TDS is deducted only if their total cash withdrawal exceeds ₹1 crore (or ₹3 crore for co-operative societies), and the rate is 2% on the amount above the threshold.
For non-filers of income tax returns for the last 3 years, the threshold is much lower at ₹20 lakhs, and higher TDS rates apply:
- 2% on withdrawals between ₹20 lakhs and ₹1 crore, and
- 5% on withdrawals exceeding ₹1 crore.
This encourages timely filing of returns and discourages large cash withdrawals without proper tax compliance.
7) Bonus Tip: How to Check Your Cash Withdrawal Limit on the Income Tax Portal
You can easily verify your cash withdrawal limit and TDS applicability through the Income Tax e-Filing Portal. After logging in with your PAN, go to Services → TDS on Cash Withdrawal (Section 194N), where you can view whether you fall under the ₹20 lakh or ₹1 crore threshold based on your filing status. This feature helps taxpayers stay updated and avoid unexpected TDS deductions by checking their status before making large cash withdrawals.