Income Tax Query

TDS on cash withdrawals – Section 194N  


1.          Who is responsible to deduct TDS:  

Ø  A banking company including any bank or banking institution referred to in Section 51 of the Banking Regulation Act, 1949. 

Ø  Co-operative society engaged in the business of banking. 

Ø  Post Office 


2.          Applicability: On cash withdrawals above Rs.1 Crore in a financial year (aggregate of withdrawals from one or more accounts maintained with the banking company/co-operative bank/post office). 


3.          Deductible from whom: Any person who makes such cash withdrawals which are more than the threshold limit. 

4.          Rate of tax deduction at source: 2% of the sum exceeding Rs.1 Crore. 

5.          Time of deduction: At the time of payment of the amount in cash which is above Rs.1 Crore. 

6.          Special provisions for non-filers of Income Tax returns: A person who has not filed his return of income for any of the three financial years prior to the financial year in which the cash withdrawal is made, the provisions are given below: 

Threshold for non-filers 


Rate of TDS above Rs. 20 Lakh to Rs.1 Crore 

2% of the amount withdrawn 

Rate of TDS above Rs.1 Crore 



7.          Whether withdrawals from different banks can be clubbed: No, as the responsibility is on a banking company, co-operative bank, or post office. Hence, withdrawal of cash from accounts maintained with different banks cannot be clubbed. However, withdrawal of cash from different accounts/accounts with different branches of the same bank can be aggregated to determine the threshold. 

8.          No deduction in certain cases: There is no need to deduct TDS u/s 194N in case the payments are made to: 

Ø  Government 

Ø  Any banking company 

Ø  Co-operative society engaged in the business of banking 

Ø  Post office 

Ø  Business correspondent of banking company/co-operative bank/post office. 

Ø  White label ATM operator of banking company/cooperative bank 

9.          TDS is income received: TDS made u/s 194N is treated as the income of the assessee. 

10.       Threshold in case of joint accounts: There is no clarity in this regard. To be on the safer side, banks may consider aggregate withdrawals from joint accounts as well as individual accounts with the same bank for the purpose of section 194N. 

11.       Whether TDS is applicable for Charitable Trusts/charitable institutions: So far, there is no exemption given to any charitable institution. That means, even if their income itself is exempt from Income Tax, they are still liable for TDS u/s 194N.