Section 194N: TDS on Cash Withdrawal from Bank — Rates, Limits & Exemptions

Last updated: 3 June 2026

Section 194N requires banks, cooperative banks, and post offices to deduct TDS on cash withdrawals. For regular ITR filers: 2% TDS on cash exceeding ₹1 crore per year per bank. For non-filers of ITR (last 3 years): 2% TDS on withdrawals above ₹20 lakh and 5% on withdrawals above ₹1 crore. The limit is per bank — not combined across all banks. ATM withdrawals are excluded. TDS deducted reflects in Form 26AS and can be claimed as credit in your ITR.

2% / 5%

TDS rate under Section 194N. Regular filers: 2% on cash above ₹1 crore per bank per year. Non-filers: 2% above ₹20 lakh and 5% above ₹1 crore. Purpose: discourage large cash transactions and improve digital payment adoption.

Section 194N TDS Rate Chart

Taxpayer Category	Cash Withdrawal Threshold	TDS Rate
Regular ITR filer (filed ITR in all 3 preceding years where applicable)	Up to ₹1 crore	Nil
Regular ITR filer	Amount exceeding ₹1 crore (per bank per FY)	2%
Non-filer (ITR not filed for last 3 preceding years)	₹20 lakh to ₹1 crore	2%
Non-filer (ITR not filed for last 3 preceding years)	Amount exceeding ₹1 crore	5%
Exempt categories (government, banks, RBI, etc.)	Any amount	Nil (Exempt)

Non-Filer Example Calculation

Non-filer withdraws ₹1.5 crore from one bank in FY 2024-25:

Withdrawal Band	Amount	Rate	TDS
First ₹20 lakh	₹20,00,000	Nil	₹0
₹20L to ₹1 crore (₹80L)	₹80,00,000	2%	₹1,60,000
Above ₹1 crore (₹50L)	₹50,00,000	5%	₹2,50,000
Total TDS deducted			₹4,10,000

Entities Covered Under Section 194N

Entity	Covered?
Scheduled commercial banks (SBI, HDFC, ICICI, etc.)	Yes
Cooperative banks	Yes
Post offices (India Post)	Yes
ATM withdrawals	No — Excluded
Government departments / state governments	Exempt
Banking companies (as withdrawee)	Exempt
White-label ATM operators	Exempt
Cash management / CMS agencies (authorised)	Exempt
Authorised dealers / money changers	Exempt

TDS Certificate and Credit

When Section 194N TDS is deducted, the bank issues Form 16A (TDS certificate) to the account holder. The TDS deducted appears in the account holder’s Form 26AS (Annual Tax Credit Statement) and AIS (Annual Information Statement). This TDS can be claimed as credit when filing your income tax return — it reduces your final tax payable or results in a refund if the TDS exceeds your actual tax liability.

Important: Section 194N threshold is per bank, per PAN, per financial year — counting all accounts (savings, current, cash credit, overdraft) held at that bank cumulatively. The bank’s TDS obligation starts only after the aggregate cash withdrawals cross the applicable threshold within the financial year.

Non-filer check: Banks verify ITR filing status through the Income Tax portal. If you have not filed returns for the three preceding financial years for which the due date has passed, the lower ₹20 lakh threshold and higher 2%/5% rates apply automatically. Filing pending ITRs restores your standard ₹1 crore threshold prospectively.

Frequently Asked Questions

Is TDS deducted if I withdraw ₹1 crore cash from one bank?

Yes. Under Section 194N, TDS is deducted at 2% on cash withdrawal exceeding ₹1 crore in aggregate from one bank (all accounts combined) in a financial year. The threshold is per bank — so if you withdraw ₹60 lakh from Bank A and ₹60 lakh from Bank B, no TDS applies at either bank individually (both are below ₹1 crore per bank). However, if you withdraw ₹1.2 crore from Bank A, TDS of 2% is deducted on the amount exceeding ₹1 crore — i.e., 2% of ₹20 lakh = ₹40,000. Post offices and cooperative banks are also covered.

What is the higher TDS rate for non-filers of ITR under Section 194N?

For individuals who have not filed income tax returns for the preceding three financial years (all three years for which due date has passed), Section 194N applies at enhanced rates: TDS at 2% on cash withdrawals exceeding ₹20 lakh and up to ₹1 crore, and at 5% on cash withdrawals exceeding ₹1 crore. So for a non-filer withdrawing ₹1.5 crore from one bank: 2% on ₹80 lakh (₹20L to ₹1Cr) = ₹1.6 lakh + 5% on ₹50 lakh (above ₹1Cr) = ₹2.5 lakh, totalling ₹4.1 lakh TDS.

Does the ₹1 crore Section 194N limit apply per bank or across all banks combined?

The ₹1 crore threshold under Section 194N applies per bank (or cooperative bank or post office) — not across all banks combined. Each bank independently tracks aggregate cash withdrawals across all accounts maintained by the same PAN at that bank. If you have accounts at five banks and withdraw ₹90 lakh from each, no TDS is triggered at any bank. There is no centralized aggregation across banking institutions. However, the non-filer lower threshold of ₹20 lakh also applies per bank individually.

Does Section 194N apply to ATM withdrawals?

No. ATM withdrawals are not covered under Section 194N. The section applies to cash withdrawal from a bank account by way of cash counter transactions, cheques, or similar instruments. ATM withdrawals are excluded, as are withdrawals by white-label ATM operators, cash management agencies (CMS), and authorised dealers (money changers). Additionally, government departments, central/state governments, banking companies, cooperative banks engaged in banking, and Reserve Bank of India are exempt from Section 194N applicability.

How can I avoid TDS under Section 194N?

There are limited ways to avoid Section 194N TDS: (1) Keep cash withdrawals from each bank below ₹1 crore per financial year (or ₹20 lakh if you are a non-filer). (2) If you are a non-filer, file your pending ITRs to restore the standard ₹1 crore threshold — you can verify your ITR filing status with the bank. (3) If you belong to an exempt category (e.g., government entity, bank, post office, cooperative society engaged in banking) you are not subject to Section 194N. Note: TDS deducted is not lost — it appears as credit in Form 26AS and can be claimed as TDS credit when filing your ITR.

Last updated: 3 June 2026. This page is for informational purposes only and does not constitute professional tax or legal advice. Consult a CA for your specific situation. Provisions are under Section 194N of the Income-tax Act 1961 as amended.

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