Quick answer: Section 194N makes your bank deduct TDS when your cash withdrawals cross ₹1 crore a year — 2% on the amount above ₹1 crore. If you have not filed returns in 3 years, the limit drops to ₹20 lakh, with 2% up to ₹1 crore and 5% above it. It is not a final tax — claim it back in your ITR.
What is Section 194N of the Income Tax Act?
Section 194N is the rule that puts TDS on large cash withdrawals. It was introduced by the Finance Act, 2019 and came into force on 1 September 2019. The idea behind it is simple: the government wants to discourage very large cash transactions and push people towards digital payments.
Under this section, the payer — a banking company, a co-operative bank or a post office — must deduct tax at source when it pays cash to a person and the total cash paid during the financial year crosses a set limit. The person withdrawing the cash does not have to do anything. The bank deducts the TDS and deposits it with the government.
Two things make Section 194N different from most other TDS sections. First, the tax is on the act of withdrawing cash, not on any income. The money you withdraw is your own money, and the withdrawal itself is not income. Second, the TDS is only a collection device. It is not your final tax. It shows up in your Form 26AS and Annual Information Statement (AIS), and you can set it off against your total tax for the year or claim it as a refund. Like other TDS rules — for example, Section 194T on partner payments and Section 194Q on purchase of goods — the deducted amount is a credit, not an extra charge.
Section 194N at a glance
| Item | Detail |
|---|---|
| Section (1961 Act) | 194N |
| Section (2025 Act, from 1 April 2026) | 393(3), Table Sl. No. 5 |
| Who deducts | Banking company, co-operative bank, post office |
| Normal limit | ₹1 crore cash in a financial year |
| Co-operative society limit | ₹3 crore in a financial year |
| Non-filer limit | ₹20 lakh in a financial year |
| Normal rate | 2% on the amount above the limit |
| Non-filer rate | 2% between ₹20 lakh and ₹1 crore; 5% above ₹1 crore |
| TDS certificate | Form 16A (Form 131 from 1 April 2026) |
| Where it appears | Form 26AS and AIS |
| Introduced | Finance Act, 2019, effective 1 September 2019 |
What is the cash withdrawal limit under Section 194N?
The limit depends on who you are and whether you file your income tax returns. There are three cases.
If you file your returns regularly, the limit is ₹1 crore in a financial year. Your bank adds up all the cash you withdraw during the year — from 1 April to 31 March — and deducts TDS only on the part above ₹1 crore.
If you are a co-operative society, the limit is ₹3 crore. This higher limit was raised from ₹1 crore to ₹3 crore from 1 April 2023 by the Finance Act, 2023.
If you have not filed your returns, the limit is much lower. A “specified person” under this section is someone who has not filed income tax returns for all three preceding assessment years, and the due date for filing those returns has already passed. For such a person, TDS starts once cash withdrawals cross ₹20 lakh in the year. This stricter rule was added by the Finance Act, 2020.
| Who you are | Cash withdrawal limit | TDS rate |
|---|---|---|
| Regular filer | Above ₹1 crore | 2% on the excess |
| Co-operative society | Above ₹3 crore | 2% on the excess |
| Non-filer (no ITR for last 3 years) | Above ₹20 lakh up to ₹1 crore | 2% on the excess |
| Non-filer (no ITR for last 3 years) | Above ₹1 crore | 5% on the excess |
One point people often miss: the TDS applies only to the amount above the limit, not to the whole withdrawal. If you withdraw ₹1.1 crore as a regular filer, TDS is 2% of ₹10 lakh — that is ₹20,000 — not 2% of ₹1.1 crore.
What is the TDS rate on cash withdrawal under Section 194N?
The standard rate is 2%. For a regular filer, that is the only rate that applies: 2% on the amount above ₹1 crore.
For a non-filer, there are two rates. Cash withdrawals above ₹20 lakh and up to ₹1 crore attract 2%. Cash withdrawals above ₹1 crore attract 5%. Both rates apply only to the part of the withdrawal that falls in each slab, not to the full amount.
If you do not give your PAN to the bank, the rate goes up to 20% under Section 206AA (Section 397(2) of the Income Tax Act, 2025). Always make sure the bank has your PAN linked to your account.
Worked examples: how much TDS will the bank cut?
Example 1 — Regular filer withdraws ₹1.5 crore. Meera files her ITR every year. In FY 2025-26 she withdraws ₹1.5 crore in cash from her bank. Her limit is ₹1 crore, so the excess is ₹50 lakh. TDS is 2% of ₹50 lakh, which is ₹1,00,000. She receives ₹1.5 crore in cash and the bank deposits ₹1,00,000 as TDS. She can claim the full ₹1,00,000 as credit in her ITR.
Example 2 — Non-filer withdraws ₹60 lakh. Rohan has not filed ITRs for the last three years. He withdraws ₹60 lakh in cash. His limit is ₹20 lakh, so the excess is ₹40 lakh. TDS is 2% of ₹40 lakh, which is ₹80,000.
Example 3 — Non-filer withdraws ₹1.2 crore. Anita has not filed ITRs for the last three years either. She withdraws ₹1.2 crore. The part between ₹20 lakh and ₹1 crore is ₹80 lakh, taxed at 2%, which is ₹1,60,000. The part above ₹1 crore is ₹20 lakh, taxed at 5%, which is ₹1,00,000. Her total TDS is ₹2,60,000. Filing her pending returns would have cut this to ₹40,000 — 2% of the ₹20 lakh above ₹1 crore.
Example 4 — Co-operative society withdraws ₹3.5 crore. A co-operative society that files its returns withdraws ₹3.5 crore. Its limit is ₹3 crore, so the excess is ₹50 lakh. TDS is 2% of ₹50 lakh, which is ₹1,00,000.
Is the ₹1 crore limit per bank or across all banks?
The limit applies per payer, not across all your banks. Your bank adds up the cash you withdraw from all the accounts you hold with that bank — savings, current and any other accounts. Withdrawals from a different bank are counted separately by that bank.
So if you withdraw ₹80 lakh from Bank A and ₹80 lakh from Bank B, neither bank deducts TDS, because neither total crosses ₹1 crore. But do not split withdrawals across banks just to stay below the limit. The rule is meant to catch large cash use, and splitting transactions to dodge tax can draw scrutiny. If you genuinely need large amounts of cash, use the proper route — file your returns, or apply for a lower-deduction certificate, which we cover below.
What counts as a cash withdrawal under Section 194N?
Any payment of cash by the bank, co-operative bank or post office counts. That includes cash withdrawn over the counter at a branch and cash withdrawn from an ATM. The bank adds up all cash payments to you during the year, whatever the channel.
What does not count is any payment that is not cash. Transfers by NEFT, RTGS, IMPS or UPI, cheques, demand drafts and card payments do not attract TDS under Section 194N. This is why the practical advice for anyone facing a big payment is to use a banking channel instead of cash. The section only touches cash.
Who is exempt from TDS under Section 194N?
The section does not apply to cash paid to certain recipients. The government, the Reserve Bank of India, banks and certain other bodies notified by the CBDT are outside its scope. The CBDT has also notified specific exemptions over the years — for example, from 1 December 2024, foreign diplomatic missions, foreign representations and UN agencies are exempt.
Co-operative societies are not exempt, but they get the higher ₹3 crore limit described above. If you think your organisation is covered by a CBDT notification, check the notification with your bank before withdrawing, and keep a copy of it on record.
Can Form 15G or 15H stop TDS on cash withdrawal?
No. This is a common misunderstanding. Form 15G and Form 15H work for interest, dividends and similar income — see our guide on how to submit Form 15G and 15H to avoid TDS on FD interest. They do not apply to Section 194N at all.
The only legal route to a lower or nil deduction is a certificate under Section 197. You apply in Form 13 on the income tax e-filing portal (e-File → Income Tax Forms → Form 13), select Section 194N, and give details of your expected cash withdrawals and your tax liability. The Assessing Officer examines the application and may issue a certificate authorising the bank to deduct at a lower rate or at nil rate. You then submit the certificate to your bank, and the bank deducts at the certified rate.
How do I claim a refund of TDS deducted under Section 194N?
The TDS your bank deducts is not lost money. It is tax already paid by you, and you can recover it in four steps.
- Check Form 26AS and the AIS. Log in to the income tax e-filing portal and open your Form 26AS or Annual Information Statement. The 194N TDS the bank deducted should appear there against your PAN. If it is missing or wrong, contact the bank first — the bank files the quarterly TDS statement in Form 26Q, and a correction has to come from the bank.
- File your income tax return for the year. Report the TDS in the TDS schedule of the ITR form.
- Set it off against your tax. The 194N amount counts as tax already paid. It reduces the tax you owe for the year.
- Claim the balance as a refund. If the TDS is more than your total tax liability, the excess comes back to you as a refund after your return is processed.
Two practical points. First, the bank issues a TDS certificate in Form 16A for the deduction — from 1 April 2026 this becomes Form 131 under the new form-numbering. Keep it with your records. Second, if you are a non-filer, filing your pending returns is the single most useful step: it raises your limit from ₹20 lakh back to ₹1 crore and drops the 5% rate.
What changed under the Income Tax Act, 2025?
From 1 April 2026, the Income Tax Act, 1961 is replaced by the Income Tax Act, 2025. The cash-withdrawal TDS rule moves to Section 393(3), Table Sl. No. 5 of the new Act. The substance stays the same: a 2% rate, a ₹1 crore limit for most recipients and a ₹3 crore limit for co-operative societies. Our complete old-vs-new section number table maps every TDS section, including 194H on commission, to its new number.
For the return you file now — Assessment Year 2026-27, for income of FY 2025-26 — the old Act and Section 194N still govern. The new section number matters for withdrawals made on or after 1 April 2026. When your bank’s statement or a new article mentions Section 393(3), it is talking about the same rule.
Common mistakes to avoid
Thinking the whole withdrawal is taxed. Only the amount above the limit is hit. On a ₹1.1 crore withdrawal by a filer, TDS is ₹20,000 — not ₹2.2 lakh.
Assuming the TDS is lost. It is not. It is creditable and refundable through your ITR, as long as it appears in Form 26AS.
Ignoring your filing status. Non-filers face the ₹20 lakh trigger and a 5% rate above ₹1 crore. Three years of missed returns can cost lakhs in extra TDS on the same withdrawal.
Forgetting it is per bank. Splitting withdrawals across banks changes how the limit is counted, but never split transactions just to dodge tax — that invites scrutiny.
Confusing 194N with the ₹2 lakh cash rule. Section 269ST is a different rule: it bars receiving ₹2 lakh or more in cash in a single day, a single transaction or a single event — see our Section 269ST guide on the ₹2 lakh cash limit and penalty. Section 194N is about TDS on cash withdrawals from banks above ₹1 crore a year. They are separate provisions with separate consequences.
Using Form 15G or 15H. They do not work for 194N. Only a Section 197 certificate in Form 13 can lower the deduction.
Frequently asked questions
What is the limit of cash withdrawal without TDS?
For a person who has filed ITRs for the last three years, there is no TDS on cash withdrawals up to ₹1 crore in a financial year. For a co-operative society the limit is ₹3 crore. For a person who has not filed returns for the last three years, TDS starts after ₹20 lakh.
What is the TDS rate on cash withdrawal above ₹1 crore?
The rate is 2% on the amount above ₹1 crore for regular filers. For non-filers, the rate is 5% on the amount above ₹1 crore. If you have not given your PAN, the rate is 20% under Section 206AA.
Is TDS deducted on the full withdrawal amount or only the excess?
Only on the excess. TDS under Section 194N applies to the part of your total cash withdrawals that crosses the limit — ₹1 crore for filers, ₹20 lakh for non-filers, ₹3 crore for co-operative societies. The part below the limit is untouched.
Does Section 194N apply to ATM withdrawals?
Yes. Cash withdrawn from an ATM counts the same as cash withdrawn over the counter at a branch. The bank adds up all cash payments to you during the financial year, whatever the channel.
How can I claim a refund of TDS deducted under Section 194N?
Check that the deduction appears in your Form 26AS or AIS, then file your income tax return and report the TDS in the TDS schedule. It is set off against your total tax liability, and any excess is refunded after your return is processed.
Can I avoid TDS on cash withdrawal by using Form 15G or 15H?
No. Form 15G and 15H do not apply to Section 194N. The only way to get a lower or nil deduction in advance is a certificate under Section 197, applied for in Form 13 on the e-filing portal and submitted to your bank.
Does the ₹1 crore limit apply per bank or on all my accounts together?
The limit is counted per bank. Each bank adds up the cash you withdraw from all accounts you hold with that bank. Withdrawals from different banks are counted separately by each bank.
What is the new section number for 194N under the Income Tax Act, 2025?
From 1 April 2026, the rule is in Section 393(3), Table Sl. No. 5 of the Income Tax Act, 2025. The rates and limits stay the same — 2%, a ₹1 crore limit, and ₹3 crore for co-operative societies. For FY 2025-26 returns, Section 194N of the 1961 Act still applies.
Official sources
- Income Tax e-Filing Portal — incometax.gov.in
- Income Tax Department — incometaxindia.gov.in
- TRACES — TDS CPC, tdscpc.gov.in
Reviewed by Asuthod Rathod, CA — This article was reviewed for accuracy against the Income Tax Act, 1961 and the Income Tax Act, 2025. Last updated: 9 November 2026.
Disclaimer: This article is for general information only and is not tax advice. Tax rules change through Budgets and CBDT notifications. Check the official sources above or consult a chartered accountant before acting on your specific situation.
Editorial byline for eircicai income tax guides — covering the Income Tax Act, 2025, section renumbering, regime comparison, and deductions. Content is reviewed by Asuthod Rathod, CA.