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Understand Section 194N of the Income Tax Act 1961, effective from 01/04/2023, governing TDS on cash withdrawals exceeding Rs. 3 crore by co-operative societies. Explore changes, rates, and Budget 2023 updates, including new sections impacting TDS on online gaming income, mutual funds, PF withdrawal, interest from listed debentures, transfer of virtual digital assets, and sale of immovable property. Stay informed on the latest tax deduction provisions for FY 2023-24 (AY 2024-25).

What is the Section 194N of the Income Tax Act 1961:-

Section 194N of the Income Tax Act 1961 is a provision that was introduced in the Finance Act, 2019. It provides for TDS (Tax Deduction at Source) on cash withdrawals from banks, post offices, and co-operative banks by certain persons. The section is applicable from 1st July 2020.

According to Section 194N, if an individual or HUF (Hindu Undivided Family) withdraws cash from their bank, post office or co-operative bank account, the bank is required to deduct TDS at the rate of 2% if the total cash withdrawal during the financial year exceeds Rs. 1 crore.

If a person withdraws cash from multiple accounts in the same bank, post office or co-operative bank, the limit of Rs. 1 crore will be applied to the total of all the accounts held by the person in that bank, post office or co-operative bank. The TDS deducted will be calculated on the amount that exceeds the threshold limit of Rs. 1 crore.

However, the provision of Section 194N does not apply to certain entities, such as the government, banks that are under the Banking Regulation Act, 1949, post offices, co-operative societies engaged in carrying on the business of banking, and any business correspondent of a banking company.

Changes in 194N Before the Budget of 2023:-

As of my knowledge I can provide you information on the changes introduced by the Finance Act, 2021, to Section 194N of the Income Tax Act, 1961.

The Finance Act, 2021, amended Section 194N to reduce the threshold limit for TDS on cash withdrawals from Rs. 1 crore to Rs. 20 lakh for persons who have not filed their income tax returns for the previous three assessment years and whose accounts are not linked with their Aadhaar. This provision is effective from 1st July 2021.

TDS on Cash Withdrawal

Further, the Finance Act, 2021, introduced a new provision under Section 206AB, which provides for higher TDS rates for certain non-filers of income tax returns. Under this provision, if a person has not filed their income tax returns for the previous two years and their aggregate TDS and TCS (Tax Collected at Source) exceeds Rs. 50,000 in each of these two years, then the TDS rate will be twice the applicable rate or 5%, whichever is higher. This provision is effective from 1st July 2021.

It is important to note that these provisions are subject to various conditions and exemptions, and taxpayers should consult with a tax professional for specific advice on their tax obligations.

194N-TDS Rate Chart for FY 2023-24 (AY 2024-25)

  • Section 194N – TDS threshold has been increased on cash withdrawal by by co-operative societies. Starting April 1st, 2023, tax will be deducted on cash withdrawals by co-operative societies if the amount exceeds Rs 3 crore, instead of the previous limit of Rs 1 crore.

Budget 2023 TDS updates

  • Section 194BA – Introduction of TDS on income from online gaming
  • Section 196A – Starting April 1st, 2023, non-residents earning income from mutual funds in India can provide a Tax Residency Certificate to avail the benefit of TDS as per rate given in tax treaty, instead of 20%.
  • Section 192A – TDS rate reduced to 20% from maximum marginal rate on PF withdrawal for employees who do not have PAN
  • Section 193 – No exemption from TDS on interest from listed debentures. Therefore, tax has to be deducted on interest on such specified securities.

Budget 2022 updates –

  • New Section 194S- A person is liable for Tax Deduction at Source (TDS) at 1% at the time of payment of the transfer of virtual digital assets.
  • Sale of immovable property under Section 194-IA- It is proposed to amend the amount on which TDS should be deducted. The person buying the property should deduct tax at 1% on the sum paid/credited or the stamp duty value of such property, whichever is higher.
  • New Section 194R- TDS at 10% should be deducted by any person who provides perks or benefits, whether convertible into money or not, to any resident for carrying out any business or profession by such resident.

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  1. Ram says:

    Dear Sir,

    recently I have done 42L cash withdrawal on this year.indian Bank charges 20% tds for extra 22L which is 4.4L tds .Is this correct tds? I am nri.Above money from other country.pls reply.thanks

    1. Prajapatlokeshh says:

      Hi Ram,
      Connect me over WhatsApp. So I can guide you accordingly.
      My whatsapp number is +91-7208043204
      I am already asisiting NRI clients.

  2. Padaga Chalapathi Rao says:

    Income tax department at Bangalore and Tirupati not responding to my grievances and d E mails for the last 18 months @ rectification request is still pending @ refund amount not deposited to my bank account @ the amount was adjusted to tje outstanding demand @ Even though the notice under section 154 is not correct and not genuine @ they are creating mental agony to Pensioners / senior citizens @ we are corresponding with income tax department several times but they are not solving my problem. @ all documents are submitted @ If any other information required I will ready submit @ Do Justice at early date please @ cancellation of IT notice given u/s 154 @’return my refund amount to my account @ kindly examine the case in a right way and do justice.

    Padaga Chalapathi Raa.

    Retired employee @ Pensioner
    Senior citizen.
    AFTPP2254H — Pan No
    Kakinada -533003,

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April 2024