Sec 194N TDS ON CASH WITHDRAWAL FROM BANK & POST OFFICE
Why was Section TDS 194N introduced?
Section 194N was brought in through the Finance Bill of 2019 to reduce cash transactions and encourage people to use digital payments more often. It applies when someone withdraws more than ₹1 crore in cash.
Section 194N applies when cash withdrawals from a bank account, co-operative society, or post office exceed ₹1 crore in a financial year. This includes the total of all cash withdrawn from a single institution during that year. The rule applies to all types of taxpayers, such as:
- An individual
- A Hindu Undivided Family (HUF)
- A company
- A partnership firm or an LLP
- An Association of Person (AOPs) or Body of Individuals (BOIs)
But it shall not apply if payment is made to-
- The Government
- Any bank (private or public sector)
- A post-office
- A co-operative bank
- Business correspondents of a banking company
- White Label ATM operators of any Bank
- Specified trader or commission agents operating under the Agriculture Produce Market Committee (APMC) vide Notification No. 70/2019-Income Tax Dated 20th September, 2019.
- An authorized dealer or agent/sub-agent of its franchise,
- A RBI licensed Full-Fledge Money Changer (FFMC) or any agent from its franchise subject to conditions as per Notification No. 80/2019-Income Tax dated 15th October, 2019.
- Any other person notified by the Government of India
However if the recipient is a corporate society tax is required to be deducted on any sum exceeding of RS 3 crore
Time of deduction :
This deduction is to be at the time of payment of such sum. The bank or financial institution (the payer) must deduct TDS when someone (the payee) withdraws more than ₹1 crore in cash in a financial year. If the person takes out money regularly, TDS will be deducted only after their total cash withdrawals cross ₹1 crore in that year.
TDS is charged only on the amount that goes over ₹1 crore.
For example, if someone withdraws ₹99 lakh during the year and later withdraws ₹1.5 lakh, TDS will apply only on the ₹50,000 that exceeds the ₹1 crore limit
Who Will Deduct TDS Under Section 194N?
The person (payer) making the cash payment will have to deduct TDS under Section 194N. Here is the list of such persons:
- Any bank (private or public sector)
- A co-operative bank
- A post office
There are certain categories of persons (payee) to whom the provision of this section will not apply. They are listed below:
- Any government body
- Any bank, including co-operative banks
- Any business correspondent of a banking company (including co-operative banks)
- Any white label ATM operator of any bank (including co-operative banks)
- Trader of APMC paying to the farmers.
- Any other person notified by the government
How to Calculate the Threshold Limit Under Sec 194 N ON CASH WITHDRAWAL FROM BANK & POST OFFICE ?
Cash withdrawal TDS for non-ITR filers
if Tax payers has not filed return for all 3 preceding pervious years for which due date U/s 139(1) already expired then tds shall be deducted as follows :
- 2 % on cash withdraws in excess of RS 20 Lakh up to RS 1 crore and
- 5% on cash withdraw in excess of RS crore
| particular | Threshold limit | Rate |
| for the corporative society : | Above 3 core | 1 % |
| For Non-ITR Filers Last 3 financial Years | Above 20 Lakhs to up to 1 core | 2% |
| For Non-ITR Filers Last 3 financial Years | Above 1 core | 5% |
| For others | Above 1 core | 1% |
✅ Short Summary: Section 194N – TDS on Cash Withdrawals Over ₹1 Crore
-
TDS applies when cash withdrawals exceed ₹1 crore per bank or post office in a financial year.
-
The ₹1 crore limit is per institution, not per taxpayer (PAN). So, multiple banks = multiple ₹1 crore limits.
-
Only the account holder’s own withdrawals trigger TDS. If someone else withdraws cash using a bearer cheque, TDS applicability is unclear.
-
For businesses, payments in cash over ₹10,000 per day cannot be claimed as a deduction under Section 40A(3).
