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May 20, 2022

TDS on cash withdrawals in excess of specified limits.

by CA Shivam Jaiswal in Income Tax

TDS on cash withdrawals in excess of specified limits.

The finance minister has added Section 194N in the Union Budget 2019 to discourage cash payments by imposing tax deduction at source (TDS) on cash withdrawals above Rs 1 crore.
For taxpayers who have not completed their income tax returns for the past three years, the TDS threshold limit under Section 194N has been decreased to Rs 20 lakh in Budget 2020.
If the taxpayer withdraws more than Rs 20 lakh in cash throughout the financial year, TDS will be deducted at the statutory rates.

How to calculate the threshold limit?

The threshold as well as rate of TDS applicable for cash withdrawals will be dependent on submission of proof of filing of your Income Tax Returns to the bank.

TDS on cash withdrawal will be applicable if:

  • The total cash withdrawal across all accounts under your PAN exceeds Rs. 20 Lakhs * or Rs. 1 Crore * in a financial year.
  • TDS will be charged on the amount withdrawn above Rs. 20 Lakhs * or Rs. 1 Crore *.
  • The cash withdrawal limit for this financial year will be considered from April 1, 2022.
  • We will consider all your cash withdrawals at the Primary CRN (Customer Relationship Number) level.
  • Rate of TDS will be as under:
    • Aggregate cash withdrawals in all accounts in a Financial Year      Income Tax Return copy submitted to the Bank      Income Tax Return copy NOT Submitted to the Bank
Aggregate cash withdrawals in all accounts in a Financial YearIncome Tax Return copy submitted to the BankIncome Tax Return copy NOT Submitted to the Bank
Up to Rs. 20 LakhsNilNil
Rs. 20 Lakhs to Rs. 1 CroreNil2% 
In excess of Rs. 1 Crore2% 5% 

The following entities are exempted from TDS on cash withdrawal:

  • State and Central Government accounts.
  • A banking company or a co-operative society engaged in carrying on the business of banking or a post office.
  • Any white label Automated Teller Machine operator of a banking company or co-operative society engaged in carrying on the business of banking, in accordance with the authorisation issued by the Reserve Bank of India.
  • Business Correspondent of a banking company or a co-operative society engaged in carrying on the business of banking.
  • Such other person(s) as the Central Government may notify.

In order to avail higher cash withdrawal threshold for TDS, request you to submit attached declaration along with ITR–V (Acknowledgement of filing of Income Tax Returns pertaining to FY 2020-21, 2019-20 or FY 2018-19)  to the nearest branch.

View TDS on Cash Withdrawal u/s 194N FAQs

1. What is TDS on cash withdrawal u/s Section 194N about?

According to section 194N of the Act, TDS has to be deducted if a sum or aggregate of sum withdrawn in cash by a person in a particular FY exceeds :

  • ₹ 20 lakh (if no ITR has been filed for all the three previous AYs), or
  • ₹ 1 crore (if ITRs have been filed for all or any one of three previous AYs).

2. Who deducts TDS on cash withdrawal u/s 194N of the Act?
TDS is deducted by banks (private, public, and co-operative) or post offices. The tax is deducted when making any cash payment to any person in excess of ₹ 20 lakh or ₹ 1 crore (as the case may be) from his/her account maintained with such banks or post offices.

3. To whom is TDS on cash withdrawal u/s 194N of the Act not applicable?
TDS on cash withdrawal u/s 194N will not apply to withdrawals made by the following persons:

  • Central or state government
  • Private or public sector
  • Any cooperative bank
  • Post office
  • Business correspondent of any bank
  • White label ATM operator of any bank
  • Central government specified commission agents or traders operating under Agriculture Produce Market Committee (APMC) for making payment to the farmers on account of purchase of agriculture produce
  • Authorized dealers and its franchise agent and sub-agent and Full-Fledged Money Changer (FFMC) licensed by RBI and its franchise agents
  • Any other person notified by the Government in consultation with RBI.

4. From when is TDS on cash withdrawal u/s 194N of the Act applicable?
TDS on cash withdrawal u/s 194N of the Act is applicable starting 1st September 2019, or FY 2019-2020.

5. At what rate is TDS on cash withdrawal u/s 194N deducted?
TDS will be deducted at a rate of 2% on cash withdrawals in excess of ₹ 1 crore if the person withdrawing the cash has filed income tax return for any or all three previous AYs.
TDS will be deducted at 2% on cash withdrawals of more than ₹ 20 lakh and 5% for withdrawals exceeding ₹ 1 crore if the person withdrawing the cash has not filed ITR for any of the preceding three AYs.

TDS-Obligations-on-cash-withdrawals-194N

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