TDS on Cash Withdrawal from Bank or Post Office (Section 194N)

What Is TDS on Cash Withdrawal?

TDS on Cash Withdrawal is tax deducted at source by banks, co-operative banks and post offices when a person's total cash withdrawals exceed the limits prescribed under income-tax law.

Under the earlier Section 194N of the Income-tax Act, 1961, the standard threshold is ₹1 crore in a financial year. For a person who has not filed income-tax returns for all three relevant preceding years, the threshold is lower: ₹20 lakh, with higher deductions applying to withdrawals above ₹1 crore.

For tax years beginning on 1 April 2026, the corresponding provision is covered under Section 393 of the Income-tax Act, 2025.

The deduction is not necessarily an additional tax. It is a tax credit that can generally be claimed when calculating your final income-tax liability.

Quick answer: For most regular ITR filers, TDS is deducted at 2% on cash withdrawals exceeding ₹1 crore in a financial year. For specified non-filers, the rate is 2% on the applicable amount above ₹20 lakh and 5% on the amount above ₹1 crore. A ₹3 crore threshold applies where the recipient withdrawing cash is a co-operative society.

Why Was Section 194N Introduced?

Section 194N was introduced in 2019 to discourage high-value cash transactions and encourage the use of digital and banking payment methods.

The provision requires specified banks, co-operative banks and post offices to deduct tax when cash withdrawals cross the applicable threshold. The deduction is based on the recipient's cumulative withdrawals from the accounts maintained with the same institution during the relevant year.

It is important to understand that TDS on Cash Withdrawal is a tax deduction, not a separate penalty. The deducted amount is generally reflected in your tax records and can be adjusted against your final tax liability or claimed as a refund, where eligible.

TDS Rates and Cash Withdrawal Limits for 2026–27

The applicable threshold and rate depend on the recipient's income-tax return filing history and whether the recipient is a co-operative society.

For the non-filer category, the higher-rate provisions apply when the recipient has not filed income-tax returns for all three relevant preceding years and the applicable filing due dates have expired.

Important: The ₹3 crore threshold is for a recipient that is itself a co-operative society. It does not automatically apply to every individual or business that withdraws money from a co-operative bank.

The bank determines the applicable TDS based on the recipient's withdrawal history and return-filing status. The relevant threshold is assessed for the applicable year, and the statutory conditions must be checked before calculating the deduction.

For the official rates and conditions, refer to the Income Tax Department's guidance on TDS on cash withdrawals.

Who Is Considered a Non-Filer Under Section 194N?

For the higher TDS rates, a non-filer generally means a person who has not filed an income-tax return for all three relevant preceding years, where the due dates for filing those returns have expired.

For example, if a person has filed a return for at least one of the three relevant years, the person may not fall into this specific non-filer category. The bank applies the statutory conditions and its prescribed compliance checks to determine the appropriate rate.

This is why filing your income-tax return on time matters even when you do not expect to have a tax payment. Your filing history can affect the TDS deducted when you make a large cash withdrawal.

Check the official Income Tax Department's TDS on Cash Withdrawal FAQs for the applicable conditions and rates.

For broader tax filing guidance, explore Finaccle's income-tax return filing services.

What Changed Under the Income-tax Act, 2025?

From 1 April 2026, the Income-tax Act, 2025, applies to the relevant tax year. The cash-withdrawal TDS provision is now referenced under Section 393, including the applicable table entry.

Key points to understand:

• Earlier reference: Section 194N of the Income-tax Act, 1961.

• New reference: Section 393 of the Income-tax Act, 2025.

• Standard threshold: ₹1 crore for most recipients who do not fall into the specified non-filer category.

• Non-filer threshold: ₹20 lakh, with the prescribed 2% and 5% rates.

• Co-operative society threshold: ₹3 crore where the recipient withdrawing cash is a co-operative society.

The new Act reorganises the legal provisions. For taxpayers, the important step is to check the applicable year, withdrawal threshold and filing status rather than relying only on the section number printed in an older article or tax reference.

For official information, refer to Section 393 of the Income-tax Act, 2025 and the Income Tax Department's TDS rate information.

TDS on Cash Withdrawal: Calculation Examples

The following examples explain how the deduction works. They assume the applicable threshold conditions are met and exclude any separate issues that may arise in a particular case.

Example 1: Regular ITR filer

Suppose a business owner withdraws ₹1.8 crore in cash during the relevant year and falls under the standard ₹1 crore threshold.

• Total cash withdrawn: ₹1,80,00,000

• Applicable threshold: ₹1,00,00,000

• Amount exceeding the threshold: ₹80,00,000

• TDS rate: 2%

Calculation: ₹80,00,000 × 2% = ₹1,60,000.

The bank would deduct ₹1.6 lakh as TDS under the stated assumptions.

Example 2: Person in the non-filer category

Suppose a person who meets the non-filer conditions withdraws ₹1.8 crore during the relevant year.

• Amount between ₹20 lakh and ₹1 crore: ₹80,00,000

• TDS at 2% on that amount: ₹1,60,000

• Amount exceeding ₹1 crore: ₹80,00,000

• TDS at 5% on that amount: ₹4,00,000

Total TDS: ₹1,60,000 + ₹4,00,000 = ₹5,60,000.

In this example, the total deduction is ₹5.6 lakh because the person falls under the higher non-filer rates.

Who Is Exempt From TDS on Cash Withdrawal?

The law provides exemptions for certain recipients and notified categories. These include, subject to the applicable conditions:

• The Central Government and State Governments

• Banks and qualifying co-operative banks

• Post offices

• Business correspondents operating under the applicable banking guidelines

• White-label ATM operators meeting the prescribed requirements

• Certain authorised dealers, money changers and other persons covered by government notifications

Some specific commission agents or traders operating under Agricultural Produce Market Committee arrangements may also qualify under applicable notifications and conditions.

Exemptions depend on the recipient's category and compliance with the relevant conditions. If you operate in a specialised business or financial-services category, check the latest official provisions and notifications before assuming that an exemption applies.

For more details, read the Income Tax Department's official FAQs on Section 194N.

How to Claim TDS Credit on Cash Withdrawals

If a bank deducts TDS from your cash withdrawal, check that the deduction is correctly reported against your PAN.

Follow these steps:

1. Log in to the income-tax e-filing portal.

2. Review your Form 26AS and Annual Information Statement (AIS), as applicable.

3. Confirm that the TDS entry matches the amount deducted by the bank.

4. Report the eligible TDS credit in your income-tax return.

5. Calculate your final tax liability after considering the available credits.

6. If eligible, claim a refund when the deducted tax exceeds your final tax liability.

Keep your bank statements and TDS records for reference. If the deduction is missing or incorrect, contact the bank to resolve the reporting issue.

For assistance with return filing, you can explore Finaccle's income-tax return filing services.

How to Avoid Unnecessary TDS on Cash Withdrawals

You can take practical steps to reduce avoidable deductions and manage large cash requirements more efficiently.

1. File your income-tax returns on time

Maintain your return-filing history and check that the required returns have been filed. This helps the bank determine whether the higher non-filer rates apply.

2. Plan large payments in advance

Where practical, use bank transfers, NEFT, RTGS, UPI or other suitable digital payment methods instead of withdrawing large amounts of cash. Choose a method that meets the needs of your transaction and applicable legal requirements.

3. Track withdrawals during the year

Keep a record of cash withdrawals from the relevant accounts held with the same banking institution. This helps you estimate when you may cross the applicable threshold.

4. Maintain records for business cash requirements

If cash is required for wages, purchases or other business payments, retain supporting documents and accounting records. Also check the separate restrictions that may apply to cash receipts and payments.

5. Check your TDS records regularly

Check Form 26AS and AIS for reported deductions and resolve discrepancies before filing your return.

For quick reference, Finaccle's TDS Rate Finder can help you explore TDS rates and thresholds for other common payment categories. For cash withdrawals specifically, always verify the applicable rate using the official Income Tax Department service.

How Finaccle Can Help With Tax Compliance

Large cash withdrawals can affect your cash-flow planning, TDS credits and income-tax return preparation. Understanding the applicable threshold before making a withdrawal can help you avoid surprises and keep your records organised.

Finaccle offers tax and compliance support for individuals and businesses. You can explore its income-tax return filing services or review its wider business, tax and compliance services.

Explore Finaccle's website to learn more about its services and how its team may assist with your tax and accounting requirements.

Frequently Asked Questions About TDS on Cash Withdrawal

Q1. Is there TDS on a cash withdrawal of ₹50,000?

Ans: No, Section 194N does not generally trigger TDS on an ordinary ₹50,000 withdrawal by itself. The rule applies when cumulative cash withdrawals cross the relevant annual threshold and the recipient falls within the provision.

Q2. What is the TDS rate on cash withdrawal above ₹1 crore?

Ans: For most recipients who are not in the specified non-filer category, TDS is 2% on the amount exceeding ₹1 crore in the relevant year. Different thresholds and rates apply to specified non-filers and qualifying co-operative societies.

Q3. What is the TDS rate for a non-filer withdrawing cash?

Ans: For a person meeting the non-filer conditions, TDS is 2% on the applicable amount above ₹20 lakh up to ₹1 crore and 5% on the amount exceeding ₹1 crore. The bank applies these rates according to the prescribed calculation.

Q4. Does the cash withdrawal limit reset every year?

Ans: Yes, the threshold is calculated for the relevant financial or tax year under the applicable law. Keep track of cumulative withdrawals rather than assessing each withdrawal as a separate transaction.

Q5. Can I claim a refund of TDS deducted on cash withdrawal?

Ans: Yes, if the TDS deducted is more than your final income-tax liability, you may claim a refund through your income-tax return, subject to the applicable rules. Check Form 26AS and AIS to confirm that the bank has reported the deduction correctly.

Q6. Does the ₹3 crore limit apply to every co-operative bank customer?

Ans: No. The ₹3 crore threshold applies when the recipient withdrawing cash is a co-operative society under the relevant provision. A person does not qualify for this higher threshold merely by holding an account with a co-operative bank.

Q7. Is Section 194N still the applicable reference in 2026–27?

Ans: For the relevant tax year beginning 1 April 2026, the corresponding provision is under Section 393 of the Income-tax Act, 2025. Section 194N remains the familiar reference under the Income-tax Act, 1961, for earlier periods.

Planning a Large Cash Withdrawal? Check Your TDS Before You Withdraw

A large cash withdrawal can affect your available funds if TDS applies. Before visiting your bank, check your return-filing history, estimate your cumulative withdrawals and confirm the threshold applicable to your situation.

Get clarity before making your next large withdrawal. Visit Finaccle to explore tax and accounting support for your financial planning and compliance needs.