TDS on cash withdrawal under section 194N is 2% of the cash you take out of a bank, co-operative bank or post office beyond ₹1 crore in a financial year. If you have not filed your income tax returns for the last three years, the bank starts deducting much earlier: 2% above ₹20 lakh and 5% above ₹1 crore.
The deduction is not a tax on the cash itself. It is credited to your PAN and adjusted against your tax when you file, so a business that files on time gets it back or uses it. The rule exists to discourage large cash dealings and to track who draws big sums. If you receive cash rather than withdraw it, the separate limits under section 269ST apply.
Quick facts
Rate
2% above ₹1 crore a yearCo-operative society withdrawing
2% above ₹3 croreNon-filer
2% from ₹20 lakh to ₹1 crore, 5% above ₹1 croreCounted per
Each bank, co-op bank or post office separatelyWho deducts
The bank or post office paying the cashNot covered
Government, banks, business correspondents, white label ATM operators, notified personsUnder the 2025 Act
Covered under section 393
194N TDS rate and cash withdrawal limit
| Account holder | Cash withdrawn in the year from one bank | TDS |
|---|---|---|
| Filed returns | Up to ₹1 crore | Nil |
| Filed returns | Above ₹1 crore | 2% on the amount above ₹1 crore |
| Co-operative society that filed returns | Above ₹3 crore | 2% on the amount above ₹3 crore |
| Has not filed returns for the 3 preceding years (due dates passed) | ₹20 lakh to ₹1 crore | 2% on the amount above ₹20 lakh |
| Same non-filer | Above ₹1 crore | 5% on the amount above ₹1 crore |
The limit is a total of all cash withdrawals in the financial year from all your accounts at that bank. Accounts at a second bank have their own separate limit. So the cash withdrawal limit from a bank without TDS is ₹1 crore a year for a regular filer.
Worked examples of TDS on cash withdrawal
A grain trader who files every year. He withdraws ₹1,30,00,000 in cash from his current account during FY 2025-26 to pay farmers. The first ₹1 crore is free of TDS. On the next ₹30,00,000 the bank cuts 2%: ₹60,000.
A shop that has stopped filing. It has not filed returns for the last three years and withdraws ₹1,50,00,000.
- ₹20,00,000 to ₹1,00,00,000: ₹80,00,000 at 2% = ₹1,60,000.
- Above ₹1 crore: ₹50,00,000 at 5% = ₹2,50,000.
- Total TDS: ₹4,10,000.
Both can claim the TDS in their returns. The shop will need to file to get any credit at all.
Who is outside section 194N of the Income Tax Act
The bank does not deduct when cash is withdrawn by the central or a state government, a bank, a co-operative bank, a post office, a banking business correspondent, a white label ATM operator, or any person notified by the government in consultation with the RBI. The deduction applies to all others: individuals, HUFs, firms, companies and trusts. Without a PAN, TDS is at 20% under section 206AA.
How the bank decides if you are a non-filer
Banks check the account holder's PAN on the compliance utility of the tax department, which shows whether returns were filed for the three earlier years whose due dates have passed. If the status shows non-filing, the lower ₹20 lakh limit applies. File any pending return you are allowed to, and the bank's status check will update. Linking PAN with Aadhaar also matters; see PAN and Aadhaar linking.
194N TDS and the new Act
| Point | FY 2025-26 | Tax year 2026-27 |
|---|---|---|
| Law | Section 194N, Income-tax Act, 1961 | Section 393, Income-tax Act, 2025 |
| Main limit | ₹1 crore | ₹1 crore |
| Rate | 2%; 5% for non-filers above ₹1 crore | Same |
| Credit shown in | Form 26AS and AIS | Form 26AS and AIS |
The 1961 Act's separate higher rate for non-filers under 206AB was removed, but 194N's own non-filer slab was not, because it is written inside the section itself.
Claiming the TDS and avoiding mistakes
| Problem | Fix |
|---|---|
| Assuming 194N TDS is a cost | It is a tax credit; claim it in your return |
| Splitting withdrawals across branches of one bank | All branches count together |
| Not filing a nil return for a loss year | File, so the bank does not treat you as a non-filer |
| TDS not reflected | Ask the bank to check the PAN in its quarterly return |
The bank reports the deduction in its quarterly return, and the credit appears in your Form 26AS. Read more on the TDS rate chart.
General information on Indian TDS law, not advice on your accounts. Banks apply notified exemptions and the law moves, so a word with a chartered accountant is wise before large withdrawals.
Sources we checked
- Income-tax Act, 1961, section 194N
- Income-tax Act, 1961, section 206AA
- Income-tax Act, 2025, section 393
Frequently asked questions
What is the TDS on cash withdrawal limit?
For regular return filers, a bank deducts 2% only on cash withdrawn above ₹1 crore in a financial year. Co-operative societies get a ₹3 crore limit.
What is the 194N TDS rate for non-filers?
If you have not filed returns for the three earlier years, the bank cuts 2% on cash withdrawn between ₹20 lakh and ₹1 crore and 5% on anything above ₹1 crore.
Is the cash withdrawal limit per bank or overall?
Per bank. All your accounts with one bank are added together, but a different bank has its own ₹1 crore limit.
Can I get back the TDS on cash withdrawal from bank?
Yes. It shows in Form 26AS against your PAN and is set off against your tax. Any excess is refunded after you file your return.
Does section 194N apply to savings accounts?
Yes, it applies to cash withdrawals from any account with a bank, co-operative bank or post office, savings or current.