Section 194N:TDS on cash withdrawal

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Introduction of Section 194N

Section 194N of the Income Tax Act, 1961 (Act) was introduced in the Union Budget 2019 presented by Finance Minister Nirmala Sitharaman. This section discourages cash transactions and paves the way for the country a step towards Digital India. Withdrawals from bank accounts impose TDS after certain threshold limits.

Applicability

Sec 194N of the Act is applicable to all taxpayers including

an Individual
a Hindu Undivided Family
a Company
a Firm
an Association of Person or a Body of Individuals, whether incorporated or not
a local authority
every artificial juridical person, not falling within any of the preceding sub-clauses.

Exemptions to TDS on cash withdrawal under 194N

No TDS shall be deducted if the amount is withdrawn from the bank or post office by the following recipients:

Central or state Government
Banks
Co-op Banks
Post office
Banking correspondents
White label ATM operators
Other persons notified by the Govt. in consultation with the RBI

Section 194N – rates & limits

PERSON	ITR FILED FOR LAST 3 YEARS	TOTAL AMOUNT WITHDRAWN IN A YEAR	TDS DEDUCTED	REMARKS
A	YES	50,00,000	NIL	UPTO 1 CRORE NO TDS
B	YES	1,10,00,000	20,000	2% TDS FOR 10 LAKHS(NO TDS UPTO 1 CRORE)
C	NO	50,00,000	60,000	2% TDS FOR 30 LAKHS(NO TDS UPTO 20 LAKHS)
D	NO	1,10,00,000	2,10,000	2% TDS FOR 80 LAKHS 5% TDS FOR 10 LAKHS

i) If you have filed an income tax return for all of the three years immediately preceding the year, then TDS to be deducted is an amount equal to 2 percent of withdrawal sum exceeding one crore rupees. Suppose if you are an ITR filed person and withdraws Rs 50 lakhs from your account in a financial year then there is no TDS for you. And if you withdraw Rs 1 crore and 10 lakhs TDS deducted at 2 percent for 10 lakhs(above 1 crore).
(ii) If you have not filed an income tax return for all the three years immediately preceding the year, then for cash withdrawal of more than 20 lakhs to Rs 1 core the TDS deducted is 2 percent, on the cash withdrawals of more than Rs 20 lakh and up to Rs 1 crore, and percent TDS for withdrawal more than Rs 1 crore. (Amendment w.e.f 01.07.2020). Suppose if you are an ITR not filed person and withdraws Rs 50 lakhs from your account in a financial year TDS deducted at 2 percent for 30 lakhs. And If you withdraw Rs 1 crore and 10 lakhs TDS deducted at 2 percent for lakhs and 5 percent for 10 lakhs(above 1 crore).

Limits per person or per account?

ITR FILED FOR LAST 3 YEARS	AMOUNT WITHDRAWN FROM SAVINGS ACCOUNT	AMOUNT WITHDRAWN FROM CURRENT ACCOUNT	TDS DEDUCTED
YES	20,00,000	70,00,000	NIL
YES	30,00,000	80,00,000	20,000
NO	5,00,000	20,00,000	10,000

The section applies to cash withdrawals made by both a resident and a Non-resident. The cash withdrawal limits are calculated per person and not per account.