TDS on cash withdrawal is tax deducted by banks when people take out large amounts of cash. This rule applies under Section 194N TDS of the Income Tax Act. If cash withdrawal crosses ₹1 crore in a year, the bank deducts TDS; for non-ITR filers, it applies after ₹20 lakh. This tax rule stops using too much cash and helps track money better. People and businesses are now moving towards digital payments. This rule is active in cash withdrawal TDS 2025 guidelines. It also encourages people to file their income tax returns regularly to avoid higher deductions. The rule applies to savings and current accounts held in banks or cooperative societies. The government promotes better tax compliance and a transparent economy by controlling high cash withdrawals.
What is Section 194N TDS?
Section 194N TDS started in 2019 to stop black money and high cash usage. Banks and post offices must deduct TDS if a person withdraws too much cash in one financial year. This rule helps the government track large money transactions.
If a person has filed an ITR for 3 years, TDS starts after ₹1 crore. The bank deducts 2% on the amount above ₹1 crore only. This lets regular taxpayers withdraw more cash without early TDS.
If the person has not filed an ITR, TDS applies after ₹20 lakh cash withdrawals. From ₹20 lakh to ₹1 crore, 2% is deducted; beyond ₹1 crore, 5% is deducted. This rule is strict for non-filers.
Cash taken from all branches of the same bank is added together. It does not matter if the money is withdrawn from the ATM or the counter. The rule works based on total yearly cash withdrawals.
This law applies to individuals, companies, HUFs, and societies. The same rule applies whether you have a current or savings account. Even cooperative banks must follow it.
Who Deducts TDS on Cash Withdrawal?
The bank or post office where you withdraw the money deducts the TDS. You do not have to pay separately or calculate anything. The tax is cut automatically before you are given the cash.
All banks, including SBI, HDFC, and cooperative banks, must follow this rule. Post offices are also part of this system. TDS applies to all big and small banks.
The bank checks your ITR filing history using your PAN. If you haven’t filed for the past 3 years, the lower limit of ₹20 lakh is applied. This means you pay TDS sooner.
Even if you withdraw from different branches, the total is counted together. This prevents people from bypassing the rule by using multiple accounts. The system adds all withdrawals under one PAN.
TDS applies to every type of account—savings, current, joint, or single. Even TDS on withdrawal from a savings account is applied once the limit is crossed. You cannot escape the rule based on account type.
TDS on Cash Withdrawal
These rules decide when the bank will deduct TDS and at what rate. Knowing the limits lets you plan withdrawals and avoid sudden deductions. The rule is different for ITR filers and non-filers.
If an ITR is filed, the limit is ₹1 crore per year. TDS is 2% on cash above ₹1 crore. If you take ₹1.5 crore, only ₹50 lakh is taxed at 2%.
If ITR is not filed, the limit is ₹20 lakh. TDS is 2% from ₹20 lakh to ₹1 crore and 5% above ₹1 crore. This is a heavy deduction for non-filers.
Here is a simple table:
| Amount Withdrawn | ITR Filed | TDS Rate |
| Up to ₹20 lakh | Yes/No | No TDS |
| ₹20L to ₹1 crore | No | 2% |
| Above ₹1 crore | Yes | 2% |
| Above ₹1 crore (No ITR) | No | 5% |
You can see that ITR filing is critical. It gives a higher limit and saves tax. You should always file your returns on time to enjoy these benefits.
Banks deduct TDS monthly as you withdraw cash. This deduction is shown in your Form 26AS. You can use it to claim a refund later during income tax return filing.
Types of Accounts Where TDS Applies
TDS is not limited to one account type. It applies to all accounts once the yearly limit is crossed. This rule is part of the wider cash withdrawal TDS applicability system.
TDS on Withdrawal From Savings Account
If the total cash withdrawals from all savings accounts linked to a single PAN exceed ₹1 crore in a financial year, the bank must deduct 2% TDS under Section 194N of the Income Tax Act.
- If the taxpayer has not filed Income Tax Returns (ITRs) for the last three years, the threshold reduces significantly to ₹20 lakh, and TDS at 2% applies for withdrawals between ₹20 lakh to ₹1 crore.
- For withdrawals above ₹1 crore in such cases, TDS at 5% is deducted.
- This rule applies to aggregated withdrawals across all banks and savings accounts under your PAN, not just one account.
TDS on Cash Withdrawal From Current Account
Businesses often use current accounts to manage large volumes of cash. The TDS rule under Section 194N also applies to current accounts, with the same thresholds as savings accounts.
- If a business withdraws over ₹1 crore in a year and has filed ITRs, TDS of 2% is applicable.
- If no ITR has been filed for the previous three years, then the ₹20 lakh threshold kicks in with TDS at 2% and 5%, depending on the amount withdrawn.
TDS on ATM Cash Withdrawal
ATM withdrawals are added to your total. The same 2% or 5% rate applies if you cross the limit using ATMs. There is no special rule for ATMs.Withdrawals made at ATMs are also included in calculating the total cash withdrawn.
- There is no special exemption or separate limit for ATM withdrawals.
- TDS is triggered if the combined ATM and branch withdrawals in a year exceed the threshold.
TDS on Cash Withdrawal SBI
SBI follows the same rule. They check how much you withdraw in a year. Then, they deduct the right amount of TDS as per Section 194N.SBI, like all other banks, follows Section 194N and checks total annual cash withdrawals under a PAN.
- SBI calculates your total withdrawals from all branches and ATMs linked to your PAN.
- It then applies TDS based on your ITR filing status and the withdrawal limit breached.
- SBI also provides TDS certificates, which can be viewed in Form 26AS on the Income Tax portal.
TDS on Cash Withdrawal For Cooperative Society
The rule applies if your society withdraws too much cash and is not exempt. Even cooperative banks follow this rule. So, planning is essential for such groups . Cooperative societies and cooperative banks are not automatically exempt from TDS on cash withdrawals.
- If a cooperative society withdraws more than ₹1 crore in cash in a financial year, TDS applies, just like it does for individuals or businesses.
- However, exemptions can apply if the society meets specific criteria laid out by the Income Tax Department (e.g., specified notification-based exemptions).
How Do you Check TDS Deducted on Cash Withdrawals?
A person can check the TDS on cash withdrawal through Form 26AS or the Annual Information Statement (AIS) on the Income Tax Department’s website. This helps you know how much tax was deducted by the bank before giving you cash.
Step-by-step to Check TDS using Form 26AS
Form 26AS can be accessed through the Income Tax e-filing portal after logging in with your PAN credentials. It displays all TDS deducted, advance tax paid, and other tax-related transactions.
- Go to the Income Tax e-filing portal.
- Log in using your PAN number and password.
- On the dashboard, click ‘e-file’ → ‘Income Tax Returns’ → ‘View Form 26AS’.
- Choose the assessment year and click ‘View/Download’.
- Under Part A, you will see a list of all TDS deductions. Find the entry listed under Section 194N.
This shows the TDS deducted by your bank when you took out cash beyond the limit. It will also show the bank name, amount withdrawn, and date.
Check using AIS (Annual Information Statement)
The AIS provides a comprehensive view of financial transactions, including TDS, as reported by different entities. It can be accessed through the Income Tax portal and is a detailed supplement to Form 26AS.
- After logging into the same portal, click ‘AIS’ under the ‘Services’ tab.
- Select the year and open the statement.
- Go to the TDS/TCS section for a detailed report on withdrawals and tax deducted.
AIS gives a more detailed view than Form 26AS. It shows cash withdrawals from all banks linked to your PAN.
Bank Statement and PAN Linkage
Cross-verifying your bank statement helps ensure that the TDS amount matches Form 26AS or AIS entries. Ensure your PAN is correctly linked with your bank account to avoid any discrepancies in tax credit.
Your bank passbook or monthly account statement will also show the amount of TDS deducted. Look for the transaction with the words like ‘TDS u/s 194N’.
Make sure your PAN is linked to your bank account. Banks may deduct TDS higher if the PAN is not updated. This also prevents Form 26AS from showing your TDS.
So, always check your Form 26AS and AIS every year before filing your return. This will help you know if TDS was rightly deducted and how to claim it later.
How Do You Claim a Refund of TDS on Cash Withdrawal?
A refund can be claimed if the cash withdrawal TDS exceeds the tax liability. This typically occurs when the individual falls under the non-taxable income bracket or has already paid taxes through other means.
When Can You Claim a Refund?
A taxpayer can claim a refund when excess tax has been deducted or paid compared to the actual tax liability. This usually happens due to higher TDS deductions or advance tax payments than required.
- If your income is below the basic exemption limit (₹2.5 lakh for most taxpayers).
- If TDS was deducted even though you did not have any total tax liability.
- Your total income is not taxable if you withdrew cash for personal or business needs.
How Do you Claim a TDS Refund via ITR?
You must file your Income Tax Return (ITR) for the applicable financial year to claim a TDS refund. The refund amount is automatically calculated and processed after ITR verification by the Income Tax Department.
- Go to the Income Tax e-filing portal and log in.
- Click on ‘File Income Tax Return’.
- Choose the correct ITR Form:
- ITR-1 for salary or pension income
- ITR-4 for small businesses or professionals under presumptive tax
- ITR-3 or others for regular companies, HUFs, etc.
- Fill in your details and go to the TDS Schedule section.
- Enter the TDS deducted under Section 194N, as shown in Form 26AS.
- Complete and submit the return.
- The system will calculate your refund and show it at the end.
You will get a refund directly to your bank account if you are eligible. Usually, refunds are processed within a few weeks to months.
Documents Needed
One needs Form 16/16A, PAN card, bank account details, and Form 26AS to claim a TDS refund. Ensure all income and TDS details are correctly reflected before filing your ITR.
- PAN card
- Bank statement showing withdrawal and TDS
- Form 26AS / AIS download
- Details of income and other deductions
If you claim your TDS refund honestly, the government will return it. But if you file the wrong information, you may get a notice. So, always match your entries with Form 26AS.
Also, file your ITR before the deadline (usually July 31st for individuals). Late filing may delay your refund or lead to penalties.
TDS Exemption on Cash Withdrawal
Some people and institutions do not need to pay this TDS. The government has given them special rules. These are listed in the law under the TDS exemption for cash withdrawal.
Who Gets the Exemption?
The central and state governments do not have to pay TDS. The Reserve Bank of India is also exempt. Banks themselves and white-label ATM companies are also free from this rule.
Farmers who get government support are also exempt. Agents who take out cash on behalf of others can also be exempt. But they must show proof.
If you feel you should be exempt, you can apply for a certificate. Use Form 13 under Rule 28. Could you submit it to the Income Tax Officer?
If approved, the bank will not deduct TDS from your cash withdrawals. But you must apply before reaching the limit. Once deducted, it cannot be reversed; it can only be claimed later.
So, knowing your category and applying early can save you money. Businesses, societies, and trusts must check if they are eligible. This helps them avoid sudden deductions.
Relevance to ACCA Syllabus
TDS (Tax Deducted at Source) on cash withdrawal is relevant to the ACCA syllabus through its connection to financial management, taxation, and compliance. ACCA students must understand how tax mechanisms affect cash flows and financial decision-making. This topic also supports knowledge of risk management and internal controls, especially regarding cash transactions in large organizations. Tax compliance and anti-money laundering practices make TDS relevant to financial professionals globally.
TDS on Cash Withdrawal ACCA Questions
Q1. Under Indian tax law, at what threshold does TDS apply to cash withdrawals by individuals from a bank account in a financial year (assuming the person has filed income tax returns for the previous three years)?
A) ₹1 lakh
B) ₹10 lakh
C) ₹50,000
D) ₹5 lakh
Answer: B) ₹10 lakh
Q2. What is the TDS rate applicable on cash withdrawals exceeding ₹1 crore in a financial year if the income tax return is not filed for the past 3 years?
A) 2%
B) 5%
C) 10%
D) 20%
Answer: B) 5%
Q3. Which section of the Indian Income Tax Act governs TDS on cash withdrawal?
A) Section 194A
B) Section 194N
C) Section 192
D) Section 206C
Answer: B) Section 194N
Q4. What is the primary purpose of TDS on large cash withdrawals in financial systems?
A) To track inventory usage
B) To prevent excessive use of credit cards
C) To discourage large cash transactions and promote digital payments
D) To enhance currency circulation
Answer: C) To discourage large cash transactions and promote digital payments
Q5. How is the applicability of TDS on cash withdrawals typically checked in accounting systems?
A) Through cash ledger entries
B) By verifying credit balances
C) By examining PAN status and past return filings
D) Through direct GST returns
Answer: C) By examining PAN status and past return filings
Relevance to US CMA Syllabus
The US CMA syllabus covers taxation, internal controls, and cash management—all areas where understanding cash-based tax rules like TDS is essential. Cash handling risks and tax implications affect financial decision-making and compliance. CMAs must know international practices to manage cross-border cash flows and improve governance and efficiency in finance functions.
TDS on Cash Withdrawal CMA Questions
Q1. Why is the concept of TDS on cash withdrawal relevant for internal control systems in organizations?
A) It ensures employee retention
B) It improves product pricing strategies
C) It minimizes cash handling risks and ensures tax compliance
D) It guarantees investment returns
Answer: C) It minimizes cash handling risks and ensures tax compliance
Q2. From a management accounting perspective, what type of control is TDS on cash withdrawal?
A) Preventive
B) Detective
C) Directive
D) Compensatory
Answer: A) Preventive
Q3. In cost management, why is it important to track high-value cash withdrawals?
A) To reduce labor costs
B) To monitor investment strategies
C) To avoid non-compliance penalties and promote cost efficiency
D) To balance the product mix
Answer: C) To avoid non-compliance penalties and promote cost efficiency
Q4. Which of the following is most directly impacted by high cash withdrawal and TDS implications in a manufacturing setup?
A) Production volume
B) Cost of capital
C) Working capital management
D) Advertising expenses
Answer: C) Working capital management
Q5. Which COSO internal control component are TDS policies part of?
A) Control Environment
B) Monitoring Activities
C) Risk Assessment
D) Information and Communication
Answer: C) Risk Assessment
Relevance to US CPA Syllabus
The US CPA exam emphasizes taxation, audit, and financial compliance. Understanding foreign tax laws like India’s TDS on cash withdrawal can enhance a CPA’s global taxation knowledge and auditing practices. This concept aids in identifying cash compliance issues, supports the preparation of tax returns, and highlights tax planning considerations for businesses operating internationally.
TDS on Cash Withdrawal CPA Questions
Q1. From a tax audit perspective, frequent high-value cash withdrawals without TDS might be flagged as:
A) Tax optimization
B) A best practice
C) A red flag for tax evasion
D) An accounting principle
Answer: C) A red flag for tax evasion
Q2. How should a CPA record TDS on cash withdrawal in the general ledger?
A) As an expense
B) As an asset
C) As a prepaid income
D) As a liability to be paid to the tax authority
Answer: D) As a liability to be paid to the tax authority
Q3. Which internal control function does monitoring cash withdrawals and TDS compliance support?
A) Business valuation
B) Financial forecasting
C) Tax compliance and fraud detection
D) Credit rating management
Answer: C) Tax compliance and fraud detection
Q4. Which of the following would most likely be required by the auditor when TDS is deducted on large cash withdrawals?
A) Marketing Strategy
B) Asset aging report
C) TDS challans and cash withdrawal ledger
D) Payroll Register
Answer: C) TDS challans and cash withdrawal ledger
Q5. A CPA must ensure that cash withdrawals from the business do not exceed the threshold without invoking compliance requirements like TDS (per Indian tax law).
A) ₹5 lakh
B) ₹1 crore
C) ₹50,000
D) ₹25 lakh
Answer: B) ₹1 crore
Relevance to CFA Syllabus
Cash flow analysis and tax efficiency are crucial in the CFA curriculum. TDS on large withdrawals ties into the fiscal policy landscape, capital structure decisions, and financial risk management. Understanding how governments regulate cash movement helps CFAs assess the impact of tax systems on liquidity and portfolio strategies, especially for emerging markets.
TDS on Cash Withdrawal CFA Questions
Q1. TDS on large cash withdrawals is an example of what type of fiscal intervention is needed.
A) Monetary policy
B) Expansionary spending
C) Tax-based compliance enforcement
D) Import substitution
Answer: C) Tax-based compliance enforcement
Q2. How can high cash withdrawal-related TDS affect a firm’s free cash flow?
A) It increases it
B) It has no impact
C) It decreases free cash flow due to tax outflows
D) It stabilizes revenue
Answer: C) It decreases free cash flow due to tax outflows
Q3. Why must CFAs consider mechanisms like TDS on cash withdrawal when modeling risk in emerging markets?
A) To track unemployment
B) To understand government expenditure
C) To assess liquidity constraints and tax compliance costs
D) To analyze forex reserves
Answer: C) To assess liquidity constraints and tax compliance costs
Q4. In a DCF model, the tax impact of TDS on frequent cash withdrawals would:
A) Not affect terminal value
B) Inflate net income
C) Reduce cash flow from operations
D) Increase dividend payout
Answer: C) Reduce cash flow from operations
Q5. Which financial analysis component can TDS be considered a part of for cash withdrawals?
A) Behavioral finance
B) Corporate governance
C) Liquidity risk and tax efficiency
D) Technical analysis
Answer: C) Liquidity risk and tax efficiency
