Section 194N - TDS on Cash Withdrawal (Non-Applicability & Computation)
# Section 194N: TDS on Cash Withdrawal
## Concept
A banking company / co-operative bank / post office must deduct TDS when a person withdraws cash from one or more accounts beyond specified thresholds.
## Non-Applicability of Section 194N
Section 194N shall NOT apply to payments made to:
1. The Government.
2. Any banking company / co-operative society engaged in banking business / post office.
3. Any business correspondent of such bank/co-operative (per RBI guidelines).
4. Any white label ATM operator of such bank/co-operative (per RBI authorisation under Payment & Settlement Systems Act, 2007).
5. Any other recipient that the Central Government may specify (in consultation with RBI), with conditions.
## Rates & Thresholds — Two Categories
### Category A: Recipient HAS filed returns u/s 139(1) on or before due date for all 3 preceding years
Withdrawal Slab
TDS Rate
Up to ₹1 crore (₹3 crore for co-op society as recipient)
NIL
Above ₹1 crore (₹3 crore for co-op society)
2%
### Category B: Recipient has NOT filed returns u/s 139(1) for last 3 preceding years
Withdrawal Slab
TDS Rate
Up to ₹20 lakhs
NIL
₹20 lakhs to ₹1 crore
2%
Above ₹1 crore
5%
## Application Across All Bank Accounts
Threshold is applied to aggregate cash withdrawn across all accounts held in the same bank by the recipient during the F.Y.
Worked example
### Example 1
Mr. Harshit (regular filer) withdraws ₹1,10,00,000 from SBI on 1.7.2025:
Threshold ₹1 crore; excess = ₹10,00,000
TDS = 2% × 10,00,000 = ₹20,000
### Example 2
ABC Co-operative Society (regular filer) withdraws ₹2,70,00,000 from SBI on 1.9.2025:
For co-op society recipient, threshold is ₹3 crore.
Withdrawal < ₹3 crore → NIL TDS.
### Example 3
XYZ Co-op Society (regular filer) withdraws ₹3,10,00,000 from MNO Co-op bank on 1.9.2025:
Excess over ₹3 crore = ₹10 lakhs.
TDS = 2% × 10,00,000 = ₹20,000.
### Example 4
Mr. Varun (NON-filer for 3 years) withdraws ₹1,20,00,000 from BOI on 1.2.2026:
First ₹20L: NIL
Next ₹80L (₹20L–₹1cr): 2% × 80,00,000 = ₹1,60,000
Above ₹1cr (₹20L): 5% × 20,00,000 = ₹1,00,000
Total TDS = ₹2,60,000.
### Example 5
Mr. Rakesh (NON-filer) withdraws ₹45,00,000 from BOI:
First ₹20L: NIL; next ₹25L: 2% × 25,00,000 = ₹50,000.
⚠️ Common exam mistakes
Forgetting that for co-operative societies as recipients, the higher threshold of ₹3 crore applies (not ₹1 crore).
Computing TDS for non-filers without applying the slab structure (2% up to ₹1cr, 5% above).
Treating ₹20L threshold uniformly — it applies only to non-filers.
Bare-Act text Section 194N · Income-tax Act, 1961 · click to expand
Section 194N: Every person, being a banking company, co-operative society engaged in carrying on the business of banking, or a post office, who is responsible for paying any sum, being the amount or aggregate of amounts, as the case may be, in cash exceeding one crore rupees (three crore rupees for co-operative society) during the previous year, to any person from one or more accounts maintained by the recipient with it shall, at the time of payment of such sum, deduct an amount equal to two per cent of sum exceeding such limit, as income-tax.