A banking company / any bank / banking institution, OR
A co-operative society engaged in business of banking, OR
A post office
...that is responsible for paying any sum in cash.
## Payee
Any person withdrawing cash from one or more accounts maintained by the recipient.
## Threshold & Rates
### Case A: Recipient HAS filed ROI for all 3 immediately preceding P.Y.s (with expired 139(1) due date)
Cash Withdrawal during P.Y.
Rate
Up to ₹ 1 crore (₹ 3 crore for co-op society)
No TDS
Exceeds the above limit
2% of sum exceeding
### Case B: Recipient has NOT filed ROI for all 3 preceding P.Y.s
Cash Withdrawal during P.Y.
Rate
Up to ₹ 20 lakhs
No TDS
> ₹ 20 lakhs but ≤ ₹ 1 crore (₹ 3 crore for co-op)
2% of the sum
> ₹ 1 crore (₹ 3 crore for co-op)
5% of the sum
## When to Deduct
At the time of payment of cash.
## Quick Recall
Scenario
Threshold
Rate above threshold
ROI filer (non co-op)
₹ 1 crore
2%
ROI filer (co-op society)
₹ 3 crore
2%
Non-filer (non co-op) above ₹ 20L–₹ 1 cr
—
2%
Non-filer (non co-op) above ₹ 1 cr
—
5%
Worked example
### Example 1
Example 1 (Filer): Mr. X (filed ROI for all 3 previous P.Y.s) withdraws ₹ 1.20 crores cash from a bank.
Solution: Excess over ₹ 1 crore = ₹ 20 lakhs.
TDS = 2% × ₹ 20,00,000 = ₹ 40,000.
### Example 2
Example 2 (Non-filer): Mr. Y (NOT filed ROI) withdraws ₹ 50 lakhs cash.
Solution: Exceeds ₹ 20 lakhs but ≤ ₹ 1 crore.
TDS = 2% × ₹ 50,00,000 = ₹ 1,00,000.
### Example 3
Example 3 (Non-filer): Mr. Z (non-filer) withdraws ₹ 1.50 crore cash.
Solution: TDS @ 5% on ₹ 1.50 crore = ₹ 7,50,000 (since recipient is non-filer and withdrawal > ₹ 1 cr).
⚠️ Common exam mistakes
Computing TDS on full amount for filers — for filers TDS is only on the excess over ₹ 1 cr / ₹ 3 cr
Forgetting that non-filer TDS is computed on the full sum (not just excess)
Using ₹ 1 crore threshold for co-operative societies — for co-ops the threshold is ₹ 3 crore
Treating the 'no filing' check as a one-year check — it is for all THREE immediately preceding P.Y.s
Bare-Act text Section 194N · Income-tax Act, 1961 · click to expand
Every person, being— (i) a banking company; (ii) a co-operative society engaged in carrying on the business of banking; or (iii) a post office, who is responsible for paying any sum, being the amount or the aggregate of amounts, as the case may be, in cash exceeding one crore rupees 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 such sum, as income-tax. Higher TDS rates apply where recipient has not filed return of income for 3 preceding years.