Section 194N: TDS on Cash Withdrawals (Limits, Exceptions & Business Impact – FY 2025–26)

To discourage excessive cash usage and improve tax compliance, the government introduced Section 194N, which mandates TDS on cash withdrawals from banks, co-operative banks and post offices.

Many businesses and individuals are unaware of this section until TDS is deducted unexpectedly.

This WonderTax guide explains:

• When Section 194N applies

• Limits & rates

• Impact on non-filers

• Practical examples

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What Is Section 194N?

Section 194N requires deduction of TDS on cash withdrawals exceeding prescribed limits from:

• Banks

• Co-operative banks

• Post offices

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Cash Withdrawal Limits (FY 2025–26)

For Income Tax Filers (Last 3 Years)

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For Non-Filers (Last 3 Years)

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Example 1: Regular Taxpayer

• Cash withdrawn: ₹1.25 crore

👉 TDS @2% on ₹25 lakh = ₹50,000

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Example 2: Non-Filer

• Cash withdrawn: ₹60 lakh

👉 TDS @2% on ₹40 lakh = ₹80,000

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Who Is Exempt from Section 194N?

• Government bodies

• Banking companies

• Business correspondents

• Certain notified entities

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Common Mistakes

• Assuming savings account is exempt

• Ignoring non-filer status

• Cash withdrawals from multiple banks (limit applies PAN-wise)

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Internal Links (WonderTax)

• Cash Transactions & Scrutiny
  https://wondertax.in/cash-transactions

• Income Tax Notice Handling
  https://wondertax.in/services/income-tax-notice-handling

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CTA – WonderTax

👉 Facing unexpected TDS on cash withdrawals?

🔗 https://wondertax.in