Section 194N makes banks, co-operative banks and post offices deduct TDS on cash withdrawals. If you file your ITR, TDS is 2% on the amount exceeding ₹1 crore withdrawn in cash from one bank in a financial year. If you are a non-filer (no ITR for the last 3 years), the threshold drops to ₹20 lakh — with 2% on ₹20 lakh to ₹1 crore and 5% above ₹1 crore. The limit is per bank, per PAN, per year — not combined across banks. TDS deducted shows in Form 26AS/AIS and is fully claimable in your return.
Section 194N — TDS Rate Chart FY 2025-26
The rate and threshold depend on one thing: whether you have filed your income-tax returns. See the full TDS rate chart 2025-26 for every section.
| Taxpayer category | Cash withdrawal (per bank, per FY) | TDS rate |
|---|---|---|
| ITR filer — up to ₹1 crore | Up to ₹1,00,00,000 | Nil |
| ITR filer — above ₹1 crore | Amount over ₹1,00,00,000 | 2% |
| Non-filer — ₹20 lakh to ₹1 crore | ₹20,00,000 – ₹1,00,00,000 | 2% |
| Non-filer — above ₹1 crore | Amount over ₹1,00,00,000 | 5% |
| Co-operative society (registered) | Up to ₹3 crore | Nil |
| Exempt payees (Govt, banks, RBI, etc.) | Any amount | Nil |
Rates and thresholds are unchanged for FY 2025-26 — Budget 2025 did not revise Section 194N. TDS applies only on the amount above the threshold, not the whole withdrawal.
The ₹1 crore threshold applies separately at each bank, counting all your accounts (savings, current, OD, cash credit) at that bank together. Split withdrawals across two banks and neither may cross ₹1 crore. But if you are a non-filer, the low ₹20 lakh threshold also applies per bank — easy to breach without realising it.
Non-Filers — The ₹20 Lakh Threshold
A non-filer under Section 194N is a person who has not filed an income-tax return for all three preceding assessment years for which the due date has passed. For such a person the threshold is slashed to ₹20 lakh and the rates rise:
- 2% — on cash withdrawals from ₹20 lakh up to ₹1 crore
- 5% — on cash withdrawals exceeding ₹1 crore
- The bank checks your filing status automatically through the Income-tax portal before deciding the rate.
Filer withdraws ₹1.2 crore (one bank)
Non-filer withdraws ₹1.5 crore (one bank)
Budget 2025 omitted Section 206AB (the general higher-TDS-for-non-filers rule) with effect from 1 April 2025. But Section 194N has its own built-in non-filer regime written into the section itself — so the ₹20 lakh threshold and 2%/5% rates for non-filers still apply in FY 2025-26. Filing your pending ITRs restores the standard ₹1 crore / 2% treatment prospectively.
Facing 194N TDS or missed ITRs pulling you into the non-filer bracket? Get it sorted.
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Who Deducts & What Is Covered
The TDS is deducted by the payer bank — every scheduled/commercial bank, co-operative bank and post office — at the time the cash is paid out, once your aggregate cash withdrawals cross the threshold. Unlike a business deductor, you do nothing at withdrawal; the bank does it automatically.
- 1Bank / Post officeDeducts 2% (or 2%/5%) on cash above threshold
- 2Deposits TDSPays to Govt & files quarterly TDS return
- 3Form 26AS / AISCredit reflects against your PAN
Section 194N deducts against the gross cash withdrawn above the limit — there is no GST-style split. Certain withdrawals and payees are outside its scope:
| Withdrawal / payee | Covered under 194N? | Note |
|---|---|---|
| Cash from bank counter / cheque | Yes | Counts toward the annual limit |
| ATM cash withdrawal | Yes | Cash paid to the account holder — included in the aggregate |
| Government / State Government | Exempt | Notified exempt payee |
| Banks & co-operative banks (as withdrawer) | Exempt | Notified exempt payee |
| White-label ATM operators / CMS agencies | Exempt | Cash-logistics, specifically exempted |
| Authorised dealers / money changers | Exempt | Notified exempt payee |
TDS under 194N is not a tax on the money withdrawn — it is only an advance tax collected upfront, fully adjustable against your final liability.
Under the Income-tax Act, 2025 (applicable from AY 2026-27), the cash-withdrawal TDS provision is renumbered as Section 393. The 2% rate, the ₹1 crore / ₹20 lakh thresholds and the non-filer 5% rate are unchanged. The familiar "194N" reference stays valid for FY 2025-26.
How to Claim the 194N TDS Credit
TDS deducted under Section 194N is not a cost — it is tax paid on your behalf. It appears in your Form 26AS and AIS against your PAN, and you claim it as a credit when you file your return. If your total tax is lower than the TDS deducted, the excess is refunded.
- Verify the deduction in Form 26AS / AIS
- Collect Form 16A from the bank
- Report the TDS credit in your ITR (Schedule TDS)
- Non-filer? File the 3 pending ITRs to restore ₹1cr limit
- Reconcile bank-wise cash withdrawals PAN-wise
- Use advance tax if TDS falls short of liability
Because 194N is deducted even when you owe no tax, the only way to recover it is by filing your ITR and claiming the credit. Many small businesses and cash-heavy taxpayers leave this money with the department simply because they never file. File the return, claim the credit, get the refund.
Had 194N TDS deducted? Claim every rupee back through a correctly filed return.
File Your ITR →- Bare provision: incometax.gov.in — Section 194N, Income-tax Act 1961
- Non-filer rates & ₹20L threshold — Finance Act 2020 (as amended)
- Co-operative society ₹3 crore threshold — Finance Act 2023
- Renumbering: Section 393, Income-tax Act 2025 (AY 2026-27)
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position with the official source before you act on it.