Income Tax

TDS on Cash Withdrawal (Section 194N): When Banks Deduct Tax on Your Own Cash

TDS on Cash Withdrawal (Section 194N): What You Need to Know

CA Nikhil Gupta·June 2026·6 min readTDS GUIDE

Reviewed by CA Nikhil Gupta · Last reviewed 17 June 2026

If you've ever withdrawn a large sum of cash from your bank and noticed a deduction you didn't expect, you've encountered Section 194N — a provision designed to nudge high-value cash transactions into the formal banking system and identify non-filers. It doesn't make the withdrawal 'taxable income', but it does deduct tax at source on your own money. Here's when it applies and how to get the credit back.

What Section 194N Covers

Section 194N requires banks, co-operative banks, and post offices to deduct TDS when a person withdraws cash exceeding specified limits from one or more accounts maintained with that institution during a financial year.

Category of Taxpayer	Threshold	TDS Rate
Filed ITR for all of the preceding 3 assessment years	Cash withdrawals above ₹1 crore in a financial year	2% on the amount exceeding ₹1 crore
Has NOT filed ITR for any of the preceding 3 assessment years ('specified person' / non-filer)	Cash withdrawals above ₹20 lakh (2% rate band) and above ₹1 crore (5% rate band)	2% on amounts between ₹20 lakh–₹1 crore; 5% on amounts above ₹1 crore

⚠ The threshold is calculated on AGGREGATE cash withdrawals across the financial year from that bank, not per withdrawal. If you withdraw ₹40 lakh in April and another ₹65 lakh in October from the same bank (and you've filed ITRs regularly), TDS under 194N would apply on the amount exceeding ₹1 crore in aggregate — i.e., on ₹5 lakh (₹1.05 crore total − ₹1 crore threshold), at 2%.

Why Were the Lower Thresholds Introduced for Non-Filers?

The lower threshold (₹20 lakh) and higher rate (5% above ₹1 crore) for those who haven't filed ITR for the preceding 3 years was introduced specifically to discourage large cash transactions by individuals who may not be within the tax net, encouraging formal banking channels and ITR filing.

Who Is Generally Exempt from Section 194N?

The Government
Banks (including co-operative banks) and post offices, when withdrawals are between themselves
Business correspondents of a banking company
White-label ATM operators of a banking company
Certain other notified entities (e.g., specified commission agents/traders dealing in agricultural produce, subject to conditions, for withdrawals used for specified agricultural purposes)

Is TDS Under 194N a Final Tax, or Can I Get It Back?

TDS deducted under Section 194N is a credit, just like any other TDS — it appears in your Form 26AS/AIS and can be claimed against your total tax liability when filing your ITR. If your tax liability is lower than the TDS deducted, the excess is refunded.

Important: This Is NOT 'Income' — It's About Cash Flow and TDS Credit

Withdrawing your own money from your own bank account is not 'income' and is not separately taxable merely because of the withdrawal. Section 194N is purely a tax-collection mechanism (TDS) on a transaction — it does not change what is or isn't taxable income. However, it does temporarily reduce the cash you receive, with the credit only realized when you file your ITR.

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Practical Tips

Track your cumulative cash withdrawals across all accounts at the same bank during the financial year if you're close to the ₹1 crore (or ₹20 lakh, for non-filers) threshold
File your ITR regularly to avoid the lower threshold and higher TDS rate applicable to non-filers
Reconcile Form 26AS/AIS for 194N TDS entries before filing your return, to ensure you claim the full credit

Frequently Asked Questions

I withdrew ₹80 lakh in cash from my savings account this year — will TDS be deducted? ▼

If you have filed your ITR for all of the preceding 3 assessment years, TDS under Section 194N applies only on cash withdrawals EXCEEDING ₹1 crore in aggregate from that bank during the financial year. Since ₹80 lakh is below ₹1 crore, no TDS would apply under 194N in this case. However, if you are a 'specified person' (haven't filed ITR for any of the preceding 3 years), the lower threshold of ₹20 lakh would apply, and TDS at 2% would be deducted on the amount between ₹20 lakh and ₹1 crore — i.e., on ₹60 lakh in this example.

Does Section 194N apply separately to each bank account I have, or to all my accounts combined? ▼

The threshold is calculated per banking company/co-operative bank/post office — i.e., aggregate cash withdrawals across ALL accounts you hold with that SAME institution during the financial year are added together for threshold purposes. If you hold accounts with multiple different banks, each bank applies the threshold independently to withdrawals from accounts held with it; the limits are not aggregated across different banks at the bank's end (though the income tax department can still see your overall financial activity through other reporting mechanisms).

Is the TDS deducted under Section 194N lost money, or can I claim it back? ▼

It's not lost — TDS under Section 194N is a tax credit, exactly like TDS on salary, interest, or any other income. The amount deducted appears in your Form 26AS and AIS under your PAN. When you file your Income Tax Return for that financial year, you claim this TDS as a credit against your total tax liability. If your actual tax liability is less than the TDS already paid (including this 194N TDS), the excess is refunded to you after processing of your ITR.

Source and review trail

Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.

Primary category: Income Tax
Official starting point: www.incometax.gov.in

Page source links

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Primary sources & related provisions

Statutory provisions referenced in this guide: