Introduction
Digital payments have grown rapidly, but many businesses and individuals still make large cash withdrawals. To reduce the cash-based economy and promote transparency, the government introduced TDS on Cash Withdrawals under Section 194N.
This tax applies when you withdraw high-value cash from a bank, co-operative bank, or post office.
In this guide, we’ll simplify limits, rates, applicability, exemptions, calculations, and FAQs.
What Is TDS on Cash Withdrawal?
TDS on cash withdrawal is a tax deducted by the bank when you withdraw cash above a specified limit in a financial year.
It applies to withdrawals from:
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Scheduled banks
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Co-operative banks
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Post offices
This provision is governed by Section 194N of the Income Tax Act, introduced in Budget 2019.
Why Was Section 194N Introduced?
The purpose of this TDS rule is:
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To discourage large cash transactions
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To promote digital payments
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To track unaccounted money and maintain transparency
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To reduce dependency on cash-intensive operations
TDS on Cash Withdrawal: Limits & Rates
The TDS rate depends on whether the individual/entity has filed an Income Tax Return (ITR) for the last 3 years.
1. If You Have Filed ITR (any of the last 3 years)
| Total Cash Withdrawal (FY) | TDS Rate |
|---|---|
| Up to ₹1 crore | No TDS |
| Above ₹1 crore | 2% |
Example
If you withdraw ₹1.20 crore in a year:
TDS = 2% of ₹20 lakh → ₹40,000
2. If You Have NOT Filed ITR (last 3 years)
| Total Cash Withdrawal (FY) | TDS Rate |
|---|---|
| Up to ₹20 lakh | No TDS |
| ₹20 lakh – ₹1 crore | 2% |
| Above ₹1 crore | 5% |
Example
If you withdraw ₹1.50 crore and haven’t filed an ITR:
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2% on ₹80 lakh (20 lakh to 1 crore)
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5% on ₹50 lakh (above 1 crore)
Total TDS = ₹1,60,000 + ₹2,50,000 = ₹4,10,000
Who Must Deduct TDS?
TDS is deducted by the bank / co-operative bank / post office at the time of payment (cash withdrawal).
You, as the account holder, cannot deduct it yourself. It is auto-deducted.
Who Is Liable to Pay TDS on Cash Withdrawal?
TDS applies to the following:
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Individuals
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Hindu Undivided Families (HUFs)
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Companies
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Firms
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LLPs
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AOP/BOI
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Trusts
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Societies
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Local authorities
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NGOs
Basically, almost everyone withdrawing large cash amounts is covered.
Exemptions — Who Is Not Covered Under Section 194N?
TDS is not applicable on cash withdrawals by:
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Government bodies
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Banks & co-operative societies
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Post office
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Business correspondents of banks
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White label ATM operators
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Entities notified by the government
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Commission agents & traders covered under APMC (for agricultural produce)
PAN Requirement
If PAN is not linked/available, TDS may be deducted at a higher rate under Section 206AA.
How to Check Whether TDS Is Deducted?
You can view it in:
1. Form 26AS
Shows the TDS deducted by the bank.
2. AIS (Annual Information Statement)
Shows high-value cash transactions and TDS details.
3. Bank statement
The debit entry will show “TDS u/s 194N”.
Can You Claim a Refund of TDS Deducted on Cash Withdrawal?
YES.
TDS under Section 194N can be claimed as a refund while filing your ITR if your total tax liability is lower than the TDS deducted.
Example:
If your total tax for the year is ₹0 but bank deducted ₹40,000 TDS → you can claim a full refund.
Important Notes
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TDS applies year-wise, not month-wise.
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Applies to all accounts combined under the same PAN.
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ATM withdrawals are also included.
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Limits apply per bank, not across all banks.
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Cash withdrawals from loan accounts are excluded.
Illustrative Examples
Example 1: Regular taxpayer
Mr. A filed ITR for last 3 years and withdrew ₹1.30 crore
TDS = 2% × ₹30,00,000 = ₹60,000
Example 2: Non-ITR filer
Mr. B did not file ITR
Withdrawn ₹30 lakh
TDS = 2% × ₹10,00,000 = ₹20,000
Example 3: Large cash withdrawals (ITR not filed)
Withdrawn: ₹1.50 crore
TDS = (2% on 80 lakh) + (5% on 50 lakh)
= ₹4,10,000
Frequently Asked Questions (FAQs)
1. Is TDS deducted on cash deposits?
No. It applies only to cash withdrawals.
2. Do ATM withdrawals attract TDS?
Yes, if the yearly limit is crossed.
3. Does TDS apply on cash withdrawals made by businesses?
Yes, for all entities except exempt categories.
4. Is GST applicable on cash withdrawals?
No.
5. How to avoid TDS on cash withdrawals?
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Withdraw less than the limit
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File your ITR
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Use digital payments instead of cash
Conclusion
TDS on cash withdrawals under Section 194N is designed to reduce cash transactions and increase transparency.
Whether you are an individual, trader, business, or professional, understanding the limits and rates helps you plan cash usage efficiently and avoid unnecessary TDS deductions.