Introduction<\/p>\n
Businesses and individuals making substantial cash withdrawals from banks should be aware of the Tax Deducted at Source (TDS) provisions under Section 194N of the Income-tax Act.<\/p>\n
Section 194N requires banks, co-operative banks and post offices to deduct TDS when the aggregate cash withdrawals by a person during a financial year exceed specified limits. The applicable threshold and TDS rate depend primarily on the taxpayer’s income-tax return filing history.<\/p>\n
For FY 2026-27, the basic framework continues to distinguish between taxpayers who have regularly filed their income-tax returns and specified taxpayers who have not filed returns for the prescribed preceding years.<\/p>\n
What is Section 194N?<\/p>\n
Section 194N applies when a person withdraws cash from one or more accounts maintained with:<\/p>\n
A banking company<\/p>\n
A co-operative bank engaged in banking business<\/p>\n
A post office<\/p>\n
The provision is intended to discourage high-value cash transactions and promote digital or banking-channel payments.<\/p>\n
Importantly, the limit is considered on the aggregate cash withdrawals during the financial year, rather than looking only at one individual withdrawal.<\/p>\n
Section 194N TDS Rates for FY 2026-27<\/p>\n
The applicable rate depends on whether the recipient has filed income-tax returns for the three immediately preceding assessment years and the due dates under Section 139(1) have expired.<\/p>\n
For a person who has filed income-tax returns for the prescribed preceding years, TDS generally applies when aggregate cash withdrawals exceed:<\/p>\n
\u20b91 crore during the financial year.<\/p>\n
The TDS rate is:<\/p>\n
2% on the amount of cash withdrawal exceeding \u20b91 crore.<\/p>\n
For a co-operative society, the \u20b91 crore threshold is increased to \u20b93 crore, subject to the applicable conditions.<\/p>\n
Where a person has not filed the income-tax returns for all of the three assessment years immediately preceding the previous year in which the cash withdrawal is made, and the due date under Section 139(1) has expired, the lower threshold applies.<\/p>\n
The applicable rates are:<\/p>\n For eligible co-operative societies, the \u20b91 crore threshold in this framework is increased to \u20b93 crore.<\/p>\n Quick Comparison<\/p>\n Example 1 \u2013 Regular ITR Filer<\/p>\n Suppose Mr. A withdraws \u20b91.20 crore in cash during FY 2026-27 and has filed the required income-tax returns.<\/p>\n TDS will generally apply to the amount exceeding \u20b91 crore.<\/p>\n Cash withdrawal: \u20b91,20,00,000<\/p>\n Threshold: \u20b91,00,00,000<\/p>\n Excess withdrawal: \u20b920,00,000<\/p>\n TDS @ 2%: \u20b940,000<\/p>\n Therefore, the bank would deduct \u20b940,000 as TDS under Section 194N.<\/p>\n Example 2 \u2013 Non-Filer of Required Returns<\/p>\n Suppose Mr. B has not filed income-tax returns for all three prescribed preceding assessment years and the applicable filing due dates have expired.<\/p>\n He withdraws \u20b950 lakh in cash during FY 2026-27.<\/p>\n Since the withdrawal exceeds \u20b920 lakh but does not exceed \u20b91 crore, TDS would generally apply at 2% on the amount of withdrawal as prescribed under Section 194N.<\/p>\n Cash withdrawal: \u20b950,00,000<\/p>\n TDS @ 2%: \u20b91,00,000<\/p>\n Example 3 \u2013 Cash Withdrawal Above \u20b91 Crore by a Non-Filer<\/p>\n Suppose Mr. B, who falls under the specified non-filer category, withdraws \u20b91.50 crore during the financial year.<\/p>\n Since the aggregate withdrawal exceeds \u20b91 crore, the applicable TDS rate becomes 5% on the amount as prescribed under Section 194N.<\/p>\n Cash withdrawal: \u20b91,50,00,000<\/p>\n TDS @ 5%: \u20b97,50,000<\/p>\n The exact deduction should be determined by the bank based on the applicable statutory calculation and the taxpayer’s withdrawal history.<\/p>\n Is the \u20b91 Crore Limit Per Bank Account?<\/p>\n No.<\/p>\n The Section 194N threshold is not simply calculated separately for each bank account. Cash withdrawals from one or more accounts maintained with the banking company, co-operative bank or post office are considered for determining the applicable threshold.<\/p>\n Therefore, splitting withdrawals across multiple accounts does not necessarily avoid Section 194N.<\/p>\n Who Deducts TDS under Section 194N?<\/p>\n The responsibility for deducting TDS lies with the:<\/p>\n Bank<\/p>\n Co-operative bank<\/p>\n Post office<\/p>\n The taxpayer withdrawing the cash does not separately deposit the Section 194N TDS.<\/p>\n The bank or other deductor determines the applicable rate based on the taxpayer’s cash withdrawal and ITR filing status.<\/p>\n What Counts as Cash Withdrawal?<\/p>\n Section 194N broadly covers cash payments or withdrawals made from the relevant accounts.<\/p>\n Businesses should therefore monitor cumulative cash withdrawals throughout the financial year rather than considering each transaction independently.<\/p>\n For accounting and compliance purposes, it is advisable to maintain a proper record of:<\/p>\n Cash withdrawals<\/p>\n Bank accounts<\/p>\n Dates of withdrawals<\/p>\n Amounts withdrawn<\/p>\n TDS deducted by the bank<\/p>\n Important Exemptions from Section 194N<\/p>\n Section 194N does not apply to certain specified recipients and transactions.<\/p>\n The Income Tax Department lists exemptions including:<\/p>\n Government<\/p>\n Banking companies<\/p>\n Co-operative banks or societies engaged in banking business<\/p>\n Post offices<\/p>\n Certain business correspondents<\/p>\n Certain white-label ATM operators<\/p>\n Other persons as may be notified by the Government in consultation with the RBI.<\/p>\n Certain categories may also receive specific treatment through Government notifications.<\/p>\n TDS Credit for the Taxpayer<\/p>\n TDS deducted under Section 194N is not an additional final tax on the cash withdrawal.<\/p>\n The amount deducted is generally reflected as TDS credit against the taxpayer’s PAN and can be considered while determining the taxpayer’s final income-tax liability, subject to applicable provisions.<\/p>\n Taxpayers should reconcile the TDS appearing in their tax records with the TDS certificate\/records provided by the bank.<\/p>\n Common Mistakes to Avoid<\/p>\n The threshold is based on aggregate cash withdrawals during the relevant financial year.<\/p>\n Splitting cash withdrawals across accounts may not prevent the application of Section 194N.<\/p>\n The \u20b920 lakh threshold can become relevant for persons falling within the specified non-filer category.<\/p>\n Businesses and individuals should verify the TDS reflected against their PAN.<\/p>\n TDS under Section 194N is a tax deduction mechanism and not, by itself, a penalty for withdrawing cash.<\/p>\n How Businesses Can Manage Section 194N Compliance<\/p>\n Businesses that regularly deal with cash should:<\/p>\n Monitor cash withdrawals across all bank accounts.<\/p>\n Review cumulative withdrawals periodically.<\/p>\n Ensure timely filing of income-tax returns.<\/p>\n Reconcile bank statements with books of accounts.<\/p>\n Track TDS deducted by banks.<\/p>\n Avoid unnecessary high-value cash transactions.<\/p>\n Maintain proper documentation for significant cash withdrawals.<\/p>\n Frequently Asked Questions (FAQs)<\/p>\n For persons who have filed the prescribed income-tax returns, TDS generally becomes applicable when aggregate cash withdrawals exceed \u20b91 crore during the financial year.<\/p>\n The standard rate is 2% once the applicable threshold is exceeded. For specified non-filers, the rate can increase to 5% when aggregate withdrawals exceed \u20b91 crore.<\/p>\n The \u20b920 lakh threshold applies to persons who have not filed income-tax returns for all three prescribed preceding assessment years, where the relevant return-filing due dates have expired.<\/p>\n No. Cash withdrawals from one or more accounts are considered for Section 194N purposes.<\/p>\n The bank, co-operative bank or post office from which the cash is withdrawn is responsible for deducting the applicable TDS.<\/p>\n No. TDS applies only when the prescribed conditions and thresholds are met, and certain persons and transactions are specifically excluded.<\/p>\n Conclusion<\/p>\n Section 194N is an important provision for individuals, businesses and other taxpayers making substantial cash withdrawals. For FY 2026-27, taxpayers who have filed the prescribed income-tax returns generally face the \u20b91 crore threshold, while specified non-filers may become subject to TDS from \u20b920 lakh of aggregate cash withdrawals.<\/p>\n The applicable rate can be 2% or 5%, depending on the amount withdrawn and the taxpayer’s ITR filing history. Co-operative societies also have a higher \u20b93 crore threshold in the circumstances specified under the law.<\/p>\n","protected":false},"excerpt":{"rendered":" Learn about TDS on cash withdrawals under Section 194N for FY 2026-27, including \u20b920 lakh and \u20b91 crore limits, 2% and 5% TDS rates, ITR filing conditions, exemptions and practical examples.<\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_bbp_topic_count":0,"_bbp_reply_count":0,"_bbp_total_topic_count":0,"_bbp_total_reply_count":0,"_bbp_voice_count":0,"_bbp_anonymous_reply_count":0,"_bbp_topic_count_hidden":0,"_bbp_reply_count_hidden":0,"_bbp_forum_subforum_count":0,"_kad_post_transparent":"","_kad_post_title":"","_kad_post_layout":"","_kad_post_sidebar_id":"","_kad_post_content_style":"","_kad_post_vertical_padding":"","_kad_post_feature":"","_kad_post_feature_position":"","_kad_post_header":false,"_kad_post_footer":false,"_kad_post_classname":"","footnotes":""},"categories":[5],"tags":[],"class_list":["post-1346","post","type-post","status-publish","format-standard","hentry","category-income-tax"],"_links":{"self":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/1346","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/comments?post=1346"}],"version-history":[{"count":1,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/1346\/revisions"}],"predecessor-version":[{"id":1521,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/posts\/1346\/revisions\/1521"}],"wp:attachment":[{"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/media?parent=1346"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/categories?post=1346"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.taxaj.com/learn\/wp-json\/wp\/v2\/tags?post=1346"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n\n
\n \nAggregate Cash Withdrawal During FY<\/th>\n TDS Rate<\/th>\n<\/tr>\n<\/thead>\n \n Up to \u20b920 lakh<\/td>\n Nil<\/td>\n<\/tr>\n \n Above \u20b920 lakh and up to \u20b91 crore<\/td>\n 2%<\/td>\n<\/tr>\n \n Above \u20b91 crore<\/td>\n 5%<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n \n\n
\n \nParticulars<\/th>\n ITR Filed as Prescribed<\/th>\n Required ITRs Not Filed<\/th>\n<\/tr>\n<\/thead>\n \n Initial threshold<\/td>\n \u20b91 crore<\/td>\n \u20b920 lakh<\/td>\n<\/tr>\n \n TDS above initial threshold<\/td>\n 2%<\/td>\n 2%<\/td>\n<\/tr>\n \n TDS above \u20b91 crore<\/td>\n 2%<\/td>\n 5%<\/td>\n<\/tr>\n \n Co-operative society threshold<\/td>\n \u20b93 crore<\/td>\n \u20b93 crore<\/td>\n<\/tr>\n \n Applicable section<\/td>\n 194N<\/td>\n 194N<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n Looking only at individual withdrawals<\/h2>\n
Maintaining multiple bank accounts to avoid TDS<\/h2>\n
Ignoring ITR filing history<\/h2>\n
Not reconciling TDS deducted by the bank<\/h2>\n
Assuming TDS is a penalty<\/h2>\n
What is the basic cash withdrawal limit under Section 194N for FY 2026-27?<\/h2>\n
What is the TDS rate under Section 194N?<\/h2>\n
What is the \u20b920 lakh limit?<\/h2>\n
Does the \u20b91 crore limit apply separately to each bank?<\/h2>\n
Who deducts TDS under Section 194N?<\/h2>\n
Is TDS under Section 194N applicable to every cash withdrawal?<\/h2>\n