TDS on Cash Withdrawl- Applicability, Rates and everything you need to know
Applicability of Sec 194N
The Section applies to following persons who withdraw cash in excess of specified limits:
- An Individual taxpayer
- Non-Resident of India
- Hindu Undivided Family(HUF)
- Domestic or Foreign Company
- Partnership Firm,LLP
- Local Authority
- Association of Persons
- Body of Individuals
Who can Deduct TDS un der Sec 194N
Following Persons are eligible to deduct TDS on Cash withdrawl
- Bank(Banking company to which Banking Regulation Act 1949 applies)
- a cooperative Bank
- a Post office
Rate of TDS deduction:
Taxpayer filing ITR for all three Assessment Year
The payer will have to deduct TDS @ 2% on cash payments / withdrawals of Rs. 1 Crore in a F.Y. u/s 194N.
| Date | Amount Withdrawn | Aggregate Amount | Computaion | TDS to be deducted |
| 01-04-2022 | 14,00,000 | 14,00,000 | Nil | Nil |
| 21-07-2022 | 26,00,000 | 40,00,000 | Nil | Nil |
| 25-08-2022 | 35,00,000 | 75,00,000 | Nil | Nil |
| 04-09-2022 | 35,00,000 | 1,10,00,000 | Rs.(1.1 crore-1 crore)*2% | 20,000 |
| 18-10-2022 | 50,00,000 | 1,60,00,000 | Rs.(1.6 crore-1.1 crore)*5% | 1,00,000 |
Taxpayer Not filing ITR for all three Assessment Year
If the reciever of money has not filed an income tax return for 3 years immediately preceeding the year, the tax deduction limit shall reduce to Rs. 20 Lakhs.
TDS will be deducted at the below mentioned rates:
- 2% on cash withdrawls on payments made above Rs. 20 Lacs and upto Rs. 1 crore
- 5% for withdrawl exceeding Rs. 1 Cr.
| Date | Amount Withdrawn |
Aggregate Amount |
Computaion | TDS to be deducted |
| 01-04-2022 | 14,00,000 | 14,00,000 | Nil | - |
| 21-07-2022 | 26,00,000 | 40,00,000 | Rs.(40,00,000-20,00,000)*2% | 40,000 |
| 25-08-2022 | 35,00,000 | 75,00,000 | Rs.(75,00,000-40,00,000)*2% | 70,000 |
| 04-09-2022 | 35,00,000 | 1,10,00,000 |
Rs.(1crore-75lacs)*2%+ Rs.(1.1 crore-1 crore)*5% |
1,00,000 |
| 18-10-2022 | 50,00,000 | 1,60,00,000 | Rs.(1.6 crore-1.1 crore)*5% | 2,50,000 |
Note: The threshold of Rs. 20 lakhs or Rs.1 Crore shall apply to cash withdrawal from each bank. If the assessee has accounts in 3 different banks, then he can withdraw Rs. 1 Crore each from all the three banks without any TDS amounts being deducted by the banks.
Non Applicability of Sec 194N
Provisions of sec 194N shall not apply if payment is made to following:
- the Government
- any banking company or cooperative society engaged in carrying on business of banking or post office
- any business correspondent of a banking company or cooperative society engaged in carrying on business of banking in accordance with the RBI guidelines
- 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
Disallowance u/s 194N:
Since TDS on Cash withdrawls are introduced with the point to discourage cash transactions. Hence follwing points need to be considered:
- The reccipient of cash cannot furnish form 15G/15H to the bank, requesting the bank to deduct TDS at lower rate
- For calculating 3 years immediately preceeding the years, then assessment year shall not be considered if the date u/s 139(1) has not expired.
