TDS on Cash Withdraw Understand TDS on Cash Withdrawals with insights on applicability, rates, and exemptions. Section 194N mandates a 2% TDS on cash withdrawals exceeding ₹1 crore. Learn about the time and conditions for deduction, plus scenarios exempt from TDS. Author CA. Atif provides a detailed example for clarity.
♦ Applicability and rate of TDS
Section 194N provides that every person, being
1. a banking company
2. a co-operative society engaged in carrying on the business of banking or
3. a post office
who is responsible for paying any sum, being the amount or aggregate of amounts, as the case may be, in cash exceeding 1 crore during the previous year, to any person from one or more accounts maintained by such recipient-person with it, shall deduct tax at source @2% of such sum as income tax.
For Co-operative Society limit has increased to Rs 3 Crore.
♦ Time of deduction
This deduction is to be made at the time of payment of such sum.
♦ Rate of TDS
- 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 Assessment Years
- 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 Assessment Years.
However, the Central Government is empowered to specify, with the consultation of RBI, by notification, the recipient in whose case this provision shall not apply or apply at reduced rate, subject to the satisfaction of the conditions specified in such notification.
♦ No TDS if payment is made to:
- Government,
- Banking Co. or Co – Operative Society engaged in carrying banking business or Post Office,
- Any business correspondent of Banking Company or Co-Operative Society in accordance with RBI Guidelines
- Any white label ATM operator of Banking Company or Co – Operative Society.
To elaborate these provisions let us take an example
Mr A withdraws the following sums in cash during the year
| Date | Amount Withdrawn |
| 01st August | 10,00,000 |
| 15th September | 35,00,000 |
| 17th November | 25,00,000 |
| 28th January | 45,00,000 |
| 16th March | 30,00,000 |
He has not furnished his return of income for last three previous years. Let us check implication of TDS u/s 194N in this case.
Answer- Since Mr A has not filed return of income for last three previous years accordingly tax shall be deducted as follows:
| Date | Amount Withdrawn | Aggregate of amount withdrawn | Tax Deducted at Source | ||
| Rate | Computation | Tax to be Deducted | |||
| 01st August | 10 Lakhs | 10 Lakhs | – | – | – |
| 15th September | 35 Lakhs | 45 Lakhs | 2% | 45 Lakhs | 90,000 |
| 17th November | 25 Lakhs | 70 Lakhs | 2% | 25 Lakhs X 2% | 50,000 |
| 28th January | 45 Lakhs | 115 Lakhs | 2% and 5% | (30 lakhs X 2%) + (15 Lakh X 5%) | 1,35,000 |
| 16th March | 30 Lakhs | 145 Lakhs | 5% | 30 Lakhs X 5% | 1,50,000 |
If Mr A had furnished his income tax return of any of previous years from last three previous years then TDS would have been deducted on cash withdrawals on 28th January @ 2% i.e. Rs. 2,30,000 (115 Lakhs X 2%) and on 16th March @ 2% i.e. Rs. 60,000 (30 Lakhs X 2%).
(The author is practicing chartered accountant and can be reached out at ca.atif95@gmail.com, Mobile- 9811270863)
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