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Last updated on: July 29, 2025
Section 194N of the Income Tax Act, 1961, introduced in the 2019 Union Budget, mandates that banks, co-operative banks, and post offices deduct Tax Deducted at Source (TDS) on cash withdrawals by individuals exceeding specific thresholds in a financial year. If cash withdrawals exceed Rs. 1 crore, a TDS of 2% is applicable; for certain non-filers of income tax returns, the threshold is lowered to Rs. 20 lakh, with 2% TDS on amounts between Rs. 20 lakh and Rs. 1 crore, and 5% on amounts above Rs. 1 crore. The primary aim is to promote digital transactions and curb cash-based tax evasion. Section 194N applies to all account holders except government entities and notified bodies, and timely compliance is essential to avoid penal consequences.
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Read BioSection 194N of the Income Tax Act, 1961, continues to create significant discussions among individuals, small businesses, banks, and professionals, especially as cash usage remains prevalent across India. While digital payments are rising, cash withdrawals still play a critical role for several segments. Understanding the rules, impact, and compliance for Section 194N in 2025 is essential for anyone dealing with high-value cash transactions.
Whether you are a business owner, agriculturist, or just managing family funds, this article gives you an in-depth, human-written guide on Section 194N TDS on cash withdrawal as applicable in 2025, real-world examples, practical pros and cons, and handy tips based on hands-on experience.
Section 194N deals with the deduction of tax at source (TDS) on cash withdrawals. Introduced in the 2019 Union Budget and updated several times since, including in 2023 and 2024, this regulation aims to curb large cash transactions and push towards digital payments, while also keeping unaccounted money in check.
In 2025, with stricter surveillance and more refined tax analytics by the Income Tax Department, non-compliance or lack of awareness about Section 194N cash TDS rules can lead to notices, penalties, and business disruptions.
Section 194N mandates banks, cooperative banks, and post offices to deduct TDS if the cash withdrawal from one or multiple accounts exceeds a certain threshold in a financial year.
Expert Insight: According to CA Nidhi Agarwal, “Many small traders and rural business owners remain unaware that multiple small withdrawals across all their bank accounts also count towards the annual TDS threshold under Section 194N.”
The key features and highlights of Section 194N in 2025 are:
Did you know? Even if you hold multiple accounts at the same bank, your withdrawals from all these accounts are aggregated to check the threshold for TDS deduction under Section 194N.
| Scenario | Threshold (₹) | TDS Rate | Applicability |
|---|---|---|---|
| ITR Filers (last 3 yrs) | 1,00,00,000 | 2 percent above ₹1 crore | From all bank accts |
| Non-ITR Filers (last 3 yrs) | 20,00,000 | 2 percent above ₹20 lakh, 5 percent above ₹1 crore | Aggregate withdrawals |
| Exempt Entities | N/A | N/A | Govt, some agents |
Expert Insight: The bank is empowered to check your PAN and ITR status through an automated centralised system, so trying to dodge the rules via multiple branches rarely works.
Yes, the provision impacts everyone who crosses the withdrawal limit, though government has kept some exemptions to protect genuine interests:
Pros:
Cons:
People Also Ask:
Q: Can I get a refund of TDS deducted under Section 194N?
A: Yes, but only after you file your income tax return, if you can prove that your income was not taxable or tax was deducted in excess.
Banks now have automated platforms that:
For individuals and businesses:
Did you know? If you operate multiple accounts in different banks, each bank checks only their own withdrawals. Aggregating across banks is your own responsibility for compliance and reporting.
Several small business owners in tier 2 cities reported:
A farmer in Punjab shared:
Most issues were resolved by:
Expert Insight: Tax consultants recommend using online calculators or bank SMS alerts to monitor total withdrawals against thresholds, saving from accidental TDS events.
Useful tip: Online marketplaces let you compare digital payment solutions from multiple service providers for businesses wanting to minimise cash dependence.
People Also Ask:
Q: What if my TDS is wrongly deducted under Section 194N?
A: You can claim refund at the time of filing your income tax return with supporting evidence.
Section 194N is unique as it taxes cash movement, not income earned. Other sections like 194A or 194C deal with interest income or contractor payments. Section 194N applies even if your money is fully tax-paid and withdrawn for family or business expenses. See this brief comparison:
| Section | Trigger | Applies To | Rate (2025) |
|---|---|---|---|
| 194N | Cash withdrawal > threshold | Everyone except exempted | 2% / 5% |
| 194A | Bank interest paid | Over Rs 40,000 (Rs 50,000 sr.citizen) | 10% |
| 194C | Contractor payments | On contract execution | 1%/2% |
| 194DA | Maturity of life insurance | Insurance payout | 5% |
Did you know? Section 194N focuses only on withdrawal stage, unlike most sections taxing income when earned.
Key Features
Section 194N Compliance Checklist
People Also Ask:
Q: Does Section 194N apply to cash deposited?
A: No. It applies only to cash withdrawn beyond the threshold, not to deposit of cash.
Section 194N of Income Tax Act mandates TDS on cash withdrawals exceeding ₹1 crore for regular ITR filers, and from ₹20 lakh for non-filers. It is aimed at limiting large cash transactions, increasing transparency and pushing digital payments. Most entities, businesses and individuals should monitor annual cash withdrawal habits, ensure routine tax filing, and shift to online payment alternatives where possible. Refunds for TDS deducted can be claimed in ITR filings.
Online platforms and accounting solutions can help track your TDS exposure, alongside advisory from local CAs.
Q1: How do I check if my cash withdrawals have crossed the Section 194N limit?
A: Track cumulative annual cash withdrawals from all bank and post office accounts. Many banks now send SMS alerts or offer dashboards in internet banking for this purpose.
Q2: When is Section 194N TDS not applicable?
A: No TDS if you do not cross the annual limit, or if you are an exempt entity like government offices, certain agricultural/fishermen agents with proper paperwork.
Q3: Can a salaried person also be subject to Section 194N TDS?
A: Yes, if total annual cash withdrawals from all accounts cross the threshold, irrespective of the account type.
Q4: Is TDS on cash withdrawal considered my tax liability?
A: No, it is not final tax. If excess is deducted, claim refund through ITR similar to other TDS amounts.
Q5: How soon is Section 194N TDS updated in my tax record?
A: Normally within a week in Form 26AS or Annual Information Statement after bank reports to the IT department.
Q6: Can family members share the 1 crore withdrawal threshold?
A: No, threshold is linked to each PAN. Each individual or entity has a separate annual limit.
Q7: What are some trusted resources to compare banking compliance solutions or professional advice online in India?
A: You can use online marketplaces like BankBazaar, Paisabazaar, or CA services portals to compare products and advisory services under one roof.
Source and Further Reading:
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Written by Prem Anand, a content writer with over 10+ years of experience in the Banking, Financial Services, and Insurance sectors.
Prem Anand is a seasoned content writer with over 10+ years of experience in the Banking, Financial Services, and Insurance sectors. He has a strong command of industry-specific language and compliance regulations. He specializes in writing insightful blog posts, detailed articles, and content that educates and engages the Indian audience.
The content is prepared by thoroughly researching multiple trustworthy sources such as official websites, financial portals, customer reviews, policy documents and IRDAI guidelines. The goal is to bring accurate and reader-friendly insights.
This content is created to help readers make informed decisions. It aims to simplify complex insurance and finance topics so that you can understand your options clearly and take the right steps with confidence. Every article is written keeping transparency, clarity, and trust in mind.
Based on Google's Helpful Content System, this article emphasizes user value, transparency, and accuracy. It incorporates principles of E-E-A-T (Experience, Expertise, Authoritativeness, Trustworthiness).
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