Section 194N makes a bank, cooperative bank or post office deduct TDS on cash withdrawals that cross a yearly limit — measured per bank, per financial year (all your accounts combined). If you have filed ITR in any of the last 3 years, TDS is 2% only on cash above ₹1 crore. If you are a non-filer, it starts far earlier — 2% from ₹20 lakh and 5% above ₹1 crore. ATM and digital withdrawals are not covered, and the TDS is a credit you adjust or refund when you file your return.
Section 194N — TDS Rate & Threshold Table
Rates and thresholds for FY 2025-26 (AY 2026-27). The higher slab that applies to you depends only on whether you have filed your income-tax return in the recent past.
| Who is withdrawing | Cash withdrawn (per bank / year) | TDS rate | TDS charged on |
|---|---|---|---|
| ITR filer (filed in ≥1 of last 3 years) | Up to ₹1 crore | Nil | — |
| ITR filer | Above ₹1 crore | 2% | Amount over ₹1 crore |
| Non-filer (no ITR in last 3 years) | Up to ₹20 lakh | Nil | — |
| Non-filer | ₹20 lakh to ₹1 crore | 2% | Amount over ₹20 lakh |
| Non-filer | Above ₹1 crore | 5% | Amount over ₹1 crore |
| Co-operative society | Above ₹3 crore | 2% | Amount over ₹3 crore |
Threshold is per bank / cooperative bank / post office, per financial year (1 Apr–31 Mar). All accounts (savings, current, OD, CC) at the same bank are combined. No surcharge or cess is added on 194N TDS.
The single biggest 194N trap: if you have not filed ITR for the three preceding years (for which the due date has passed), your TDS-free limit drops from ₹1 crore to just ₹20 lakh, and anything over ₹1 crore is taxed at 5% instead of 2%. Filing even one return restores the higher ₹1 crore threshold.
ITR-Filer vs Non-Filer — Why It Matters
Section 194N deliberately rewards return-filers with a much higher tax-free withdrawal limit. The bank checks your filing status through the income-tax portal utility before deducting.
ITR Filer
- Filed ITR in any of the 3 preceding years
- No TDS up to ₹1 crore cash / bank / year
- 2% only on the excess over ₹1 crore
- Best position — file to stay here
Non-Filer
- No ITR in any of the last 3 years
- TDS starts at ₹20 lakh, not ₹1 crore
- 2% between ₹20 lakh and ₹1 crore
- 5% on everything above ₹1 crore
What Counts — and What Is Exempt
| Withdrawal / person | 194N TDS? | Note |
|---|---|---|
| Over-the-counter cash, cash pay orders / DDs in cash | Yes | Physical cash paid out by the bank |
| ATM cash withdrawal | No | Excluded — but still tracked toward the annual limit |
| NEFT / RTGS / UPI / cheque transfer | No | Only cash payout triggers 194N |
| Government departments | No | Specifically exempted |
| Banks, cooperative banks, white-label ATM operators | No | Exempt payees |
| Business correspondents & agents of banks | No | Notified exemptions |
Introduced by Finance Act 2019; the lower non-filer thresholds were added by Finance Act 2020.
The Income-tax Act, 2025 (in force from AY 2026-27) re-numbers the cash-withdrawal TDS provision as Section 393. The rates, thresholds and filer/non-filer logic are unchanged — most banks, forms and searches still refer to it as "194N", so that remains the practical reference.
How Much TDS Is Actually Deducted?
Assume the same person withdraws ₹1.5 crore in cash from one bank in FY 2025-26. The TDS depends entirely on filing status.
ITR Filer — ₹1.5cr withdrawn
Non-Filer — ₹1.5cr withdrawn
On the identical ₹1.5 crore withdrawal, a non-filer loses ₹4.1 lakh to TDS versus ₹1 lakh for a filer — a ₹3.1 lakh gap purely because no return was filed. The TDS is recoverable via ITR, but the cash is blocked until then.
Had 194N TDS deducted on a business cash withdrawal? We reconcile it and claim it back in your return.
Talk to a TDS Expert →194N TDS Is Not a Final Tax — Claim It
TDS under 194N is only an advance collection. It shows up in your Form 26AS and AIS, and the bank issues a Form 16A certificate quarterly. You adjust the whole amount against your final tax liability when you file — and if your tax is lower, the balance is refunded.
Cash-intensive businesses can avoid the block-up altogether by applying for a lower or nil deduction certificate in Form 13 under Section 197, or simply by shifting payments to banking channels.
- Keep filing ITR to hold the ₹1 crore threshold
- Check Form 26AS / AIS before filing to match 194N credit
- Withdraw across banks — the limit is per bank
- Use NEFT/RTGS/UPI for large payments to avoid 194N entirely
- Apply for Form 13 (Sec 197) if you have genuine high cash needs
Section 194N — Frequently Asked Questions
Related TaxClue services
194N TDS Deducted? Get It Reconciled & Refunded
Whether the bank cut 2% or 5% on your cash withdrawal, TaxClue's CA-led team matches it in your 26AS/AIS, claims the credit in your return and helps you apply for a lower-deduction certificate — 100% online, across India.