Section 194N - TDS on Cash withdrawal over and above Rs. 1 crore

CA Piyush Agarwal | Last updated: 13 February 2020

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Quick Summary

Section 194N of the Income-tax Act, introduced in 2019, mandates Tax Deducted at Source (TDS) on cash withdrawals exceeding Rs 1 crore in a financial year. This applies to aggregate withdrawals from all accounts held with a single bank. The TDS rate is 2% on the amount exceeding the Rs 1 crore threshold. Certain entities like government bodies and banking companies are exempt, and specific notifications provide exemptions for commission agents and traders dealing with agricultural produce.

In order to discourage cash transactions and move towards cash-less economy, a new Section 194N (Introduced via Union Budget 2019) has been inserted under Income-tax Act with effect from September 1, 2019 to provide for deduction of tax on cash withdrawals made by any person from his bank or post-of

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FAQ :

Section 194N requires tax to be deducted at source (TDS) at a rate of 2% on cash withdrawals exceeding Rs 1 crore in aggregate from any bank or post-office account within a financial year.

The Rs 1 crore limit applies to the aggregate of all sums withdrawn from all accounts maintained by a person with a single bank in a financial year.

Yes, TDS under Section 194N is not applicable for payments made to government, banking companies, co-operative societies engaged in banking, authorised business correspondents, or white label ATM operators, among others specified by the central government.

The TDS rate under Section 194N is 2% on the cash payment or withdrawal amount that exceeds Rs 1 crore in a financial year.

No, cash withdrawal is not considered income. Section 198 of the Income Tax Act clarifies that cash withdrawals shall not be deemed to be the income of the person.