5 Mins

Section 194N of the Income Tax Act, 1961 is applicable on cash withdrawals from an account maintained with a bank or post office of India. The CBDT introduced section 194N through the Finance Bill 2019. The intent is to discourage cash transactions and promote digital transactions in the economy.  

What is Section 194N?

Section 194N is applicable on cash withdrawal in excess of Rs 1 crore. Section 194N is attracted when a taxpayer withdraws more than Rs 1 crore from the account. TDS must be deducted when the withdrawn amount or the aggregate of all withdrawal amounts during the financial year from one or all accounts exceeds Rs 1 crore. Such accounts are maintained by the taxpayer. TDS must be deducted at the time of payment of such an amount to the taxpayer.  

The provisions apply to the following taxpayers who withdraw in excess of Rs 1 crore:

  1. An Individual Taxpayer
  2. Non-Resident of India
  3. Hindu Undivided Family (HUF)
  4. Domestic or Foreign Company
  5. Partnership Firm, Limited Liability Partnership LLP
  6. Local Authority
  7. Association of Person AOP
  8. Body of Individuals BOI

Who is Liable to Deduct TDS Under Section 194N?

The person who is responsible for paying the amount withdrawn is liable to deduct TDS at the time of making the payment to the taxpayer. The following are such persons who are responsible for TDS deduction:

  1. a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act);
  2. a co-operative society engaged in carrying on the business of banking; or
  3. a post office

To whom is TDS on cash withdrawal u/s 194N of the Act not applicable?

Section 194N is not applicable to the following persons irrespective of the amount withdrawn by them:

  • Central or State Government of India
  • Private Sector Bank
  • Public Sector Bank
  • Cooperative Bank
  • Post Office of India
  • Business correspondent of any bank
  • White label ATM operator of any bank
  • Central government-specified commission agents or traders operating under the Agriculture Produce Market Committee (APMC) for making payment to the farmers on account of the purchase of agricultural produce
  • Authorized dealers and its franchise agent and subagent and Full-Fledged Money Changer (FFMC) licensed by RBI and its franchise agents
  • Any other person as notified by the Central Government of India in consultation with the Reserve Bank of India RBI

TDS Rate Under Section 194N

Condition Amount WithdrawnTDS Rate
The taxpayer has filed the income tax return for any or all the previous 3 assessment yearsThe amount is withdrawn in excess of Rs 1 crore2% of the amount withdrawn
The taxpayer has not filed the income tax return for any of the previous 3 assessment yearsThe amount is withdrawn in excess of Rs 20 lakhs and less than Rs 1 crores2% of the amount withdrawn
The taxpayer has not filed the income tax return for any of the previous 3 assessment yearsAmount is withdrawn in excess of Rs 1 crore5% of the amount withdrawn

How To Calculate TDS Amount Under Section 194N?

Let us understand the calculation of TDS deduction under section 194N with the help of the following illustrations:

Taxpayer has filed ITR 

Miss Puja makes the following withdrawals from her savings account during the financial year. She has filed income tax returns for the previous years. The following table will help you understand the TDS amount.

DateAmount WithdrawnCumulative Amount WithdrawnComputation TDS Amount
10.01.2021Rs 20 lakhsRs 20 lakhsNILNIL
20.04.2021Rs 40 lakhsRs 60 lakhsNILNIL
31.07.2021Rs 10 lakhsRs 70 lakhsNILNIL
03.08.2021Rs 40 lakhsRs 1.1 Crore(Rs 1.1 Crore – Rs 1 Crore) * 2%Rs 20,000
23.09.2021Rs 20 lakhsRs 1.3 Crore(Rs 1.3 Crore – Rs 1.1 Crore) * 2%Rs 40,000

Taxpayer has NOT filed ITR 

Miss Puja makes the following withdrawals from her savings account during the financial year. She has NOT filed income tax returns for the previous years. The following table will help you understand the TDS amount.

DateAmount WithdrawnCumulative Amount WithdrawnComputation TDS Amount
10.01.2021Rs 20 lakhsRs 20 lakhsNILNIL
20.04.2021Rs 40 lakhsRs 60 lakhs(Rs 60 lakhs – Rs 20 lakhs) * 2%Rs 80,000
31.07.2021Rs 10 lakhsRs 70 lakhs(Rs 70 lakhs – Rs 60 lakhs) * 2%Rs 20,000
03.08.2021Rs 40 lakhsRs 1.1 Crore(Rs 1 Crore – Rs 70 lakhs) * 2%(Rs 1.1 Crore – Rs 1 crore) * 5%Rs 1,10,000
23.09.2021Rs 20 lakhsRs 1.3 Crore(Rs 1.3 Crore – Rs 1.1 Crore) * 5%Rs 1,00,000

Frequently Asked Questions

How do I claim my 194N TDS?

You can claim the TDS deducted under section 194N at the time of filing your income tax return. While filing the income tax return you must enter the amount of TDS already deducted under the details of ‘TDS Deduction’. From your total tax liability, you can deduct the TDS amount and pay the residual net payable amount. If the net tax payable is negative then you are eligible for a tax refund.

How do I verify 194N?

You can verify the TDS deducted under section 194N by viewing Form 26AS. Form 26AS contains the details of TDS deducted during the financial year. You can download Form 26AS by logging in to the TRACES website or through the Income Tax official website. Here is a step-by-step guide on how to download your Form 26AS.

Is 194N applicable for NRI?

Yes, section 194N is applicable to a resident taxpayer as well as a non-resident taxpayer NRI.

From when is TDS on cash withdrawal u/s 194N of the Act applicable? 

TDS on cash withdrawal u/s 194N of the Act is applicable starting 1st September 2019, or FY 2019-2020.

Can I submit Form 15G or Form 15H for a lower TDS deduction under section 194N?

No, you cannot submit Form 15G or Form 15H for a lower TDS deduction under section 194N

ALSO READ