TDS on Cash Withdrawals: Thresholds and Applicability – myITreturn Help Center

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FY 2025-26: Section 194N, Income-tax Act, 1961
Tax year 2026-27: Section 393, Income-tax Act, 2025

Section 194N requires a bank, cooperative bank or post office to deduct TDS when cash withdrawals by a person exceed the applicable annual threshold. The threshold depends on the recipient’s return-filing history and, in some cases, whether the recipient is a cooperative society.

Thresholds and Rates for FY 2025-26

Recipient	Return-filing status	TDS treatment
Person other than a cooperative society	Filed the required returns	2% on cash withdrawals exceeding ₹1 crore in the financial year.
Cooperative society	Filed the required returns	2% on cash withdrawals exceeding ₹3 crore in the financial year.
Person other than a cooperative society	Did not file returns for all three relevant preceding assessment years	2% on the amount above ₹20 lakh up to ₹1 crore, and 5% on the amount above ₹1 crore.
Cooperative society	Did not file the required returns	2% on the amount above ₹20 lakh up to ₹3 crore, and 5% on the amount above ₹3 crore.

Aggregation rule: Withdrawals from all accounts held with the same bank, cooperative bank or post office are aggregated. Withdrawals from different institutions are tested separately by each institution.

Who Is Treated as a Non-Filer?

The special lower threshold applies where the recipient has not filed the return for all three preceding assessment years for which the return-filing due date has expired. The bank may verify the status through the Income Tax Department’s compliance-check facility.

Persons Generally Excluded

Section 194N does not apply to specified recipients, including:

Government.
Banks and cooperative banks.
Post offices.
Business correspondents of banking companies or cooperative banks.
White-label ATM operators and other notified classes, subject to conditions.

TDS is not a tax on cash itself. The withdrawal does not automatically become taxable income. TDS is a tax credit that should be matched with Form 26AS/AIS and claimed in the ITR against the recipient’s actual tax liability.

Example

A regular return filer withdraws ₹1.30 crore in cash from one bank during FY 2025-26. TDS is 2% of ₹30 lakh, or ₹60,000. If the same person also withdraws cash from another bank, that bank separately applies the threshold based on withdrawals maintained with it.

How to Check and Claim the TDS

Review the TDS entry in Form 26AS and AIS.
Confirm that the PAN, amount and financial year are correct.
Report the underlying income separately according to its true nature.
Claim the available TDS credit in the applicable ITR.
Ask the deducting institution to correct its TDS statement if the credit is missing or incorrect.

Transactions from 1 April 2026

Cash withdrawals occurring on or after 1 April 2026 are governed by the corresponding cash-withdrawal entry in section 393 of the Income-tax Act, 2025. The return-filing status and threshold should be checked for the applicable tax year rather than applying the earlier Act merely because the bank account was opened before that date.

Common Mistakes

Assuming the threshold applies separately to each account at the same bank.
Treating TDS as the final tax liability.
Ignoring the three-year return-filing test.
Failing to reconcile TDS deducted near the end of the year.

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