The provisions relating to TDS on cash withdrawals have been restructured under the Income-tax Act, 2025. The earlier Section 194N of the Income-tax Act, 1961 is now covered under Section 393(3) [Table: Sl. No. 5.D(a) and 5.D(b)], effective from 1st April, 2026.
This restructuring retains the provisions relating to deduction of tax at source on cash withdrawals exceeding specified limits, while incorporating updated threshold limits based on the category of the deductee.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 393(3)
- Table Reference:
- Sl. No. 5.D(a) – Co-operative Society
- Sl. No. 5.D(b) – Other persons
- Nature of Payment: Cash withdrawal from bank, post office or co-operative society
- Earlier Section (IT Act 1961): Section 194N
- Return Form: 26Q and 27Q
- Code (for return filing):
- 1064 – Co-operative society
- 1065 – Other persons
Applicability of TDS
TDS is required to be deducted on cash withdrawals exceeding the prescribed limits from banking companies, co-operative societies engaged in banking, and post offices. The provisions apply at the time of cash withdrawal by the recipient.
The responsibility to deduct tax lies with the bank, co-operative bank, or post office making such payment, and the provisions apply to the person withdrawing cash from such institutions.
Rate of TDS
- 2% on the amount exceeding the prescribed threshold
Threshold Limit (Category-wise)
TDS applicability depends on the category of the deductee:
Co-operative Society
- Threshold limit: ₹3 crore
Other Persons
- Threshold limit: ₹1 crore
TDS is applicable only on the amount exceeding these limits.
Time of Deduction
TDS shall be deducted:
- At the time of cash withdrawal
Exempt Entities (As per Government Notification)
As per Notification No. 123/2024, the following entities are exempt from applicability of Section 393(3) [Table: Sl. No. 5.D(a) and 5.D(b)]:
- Foreign representations approved by Ministry of External Affairs
- Diplomatic missions
- United Nations agencies
- International organizations
- Consulates and offices of honorary consuls
These entities are exempt due to their special status under international conventions and agreements.
Applicability of the Exemption
The exemption is applicable to the above-listed entities as they hold a special status under international conventions and agreements. This status ensures that their operations in India are not subjected to local taxation, aligning with diplomatic principles and global norms.
This update ensures compliance with international agreements while streamlining the application of Section 393(3) [Table: Sl. No. 5.D(a) and 5.D(b)] for specific exempt entities.
Additional Applicability for Non-Residents (As per IT Act 2025)
| Nature of Payment | Previous Section (IT Act 1961) | New Section Reference | Rate | Remarks |
|---|---|---|---|---|
| Payment of certain amounts in cash by bank/ post office / co-operative society to a deductee being a co-operative society | Section 194N | 393(3) [Table: Sl. No. 5.D(a)] | 2% | Applicable to co-operative society |
| Payment of certain amounts in cash by bank/ post office / co-operative society to a deductee being a person other than co-operative society | Section 194N | 393(3) [Table: Sl. No. 5.D(b)] | 2% | Applicable to other persons |
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Does a Agriculture businessman or Onion Merchant have exemption or not ? Earlier farmer was exempted from this section. Has it been changed ? Yesterday my clients bank deducted TDS on Cash Withdrawal but earlier there was no Tds deducted on it. ?
To our best knowledge, the Act does specify the type of ‘person’ withdrawing cash from bank who may be exempted under certain conditions. Farmers are one such entity, however, there are strict conditions that apply to avail TDS exemption on such withdrawals. You need to consult a tax professional stating your specific case. In general, if the threshold is reached, banks are mandated to apply TDS.
Is the statement ‘TDS is applicable only on the amount exceeding these limits’ accurate in relation to Serial No. 5 of Section 194J? Based on my interpretation of this section, neither the Act nor the Rules explicitly state that TDS should only be deducted on the amount exceeding the specified limit. I might be mistaken, but I would love to discuss this with you to clear up my understanding.
In the case of old Section 194N (now covered under Section 393(3) Sl. No. 5.D(a) – Co-operative Society and Sl. No. 5.D(b) – Other persons), the provision is specifically structured in a manner where TDS applies only on the amount exceeding the prescribed threshold limit.
This differs from sections such as 194J, 194C, etc., where crossing the threshold generally triggers TDS on the entire payment amount.
For example, if the applicable threshold for cash withdrawal is ₹1 crore and the withdrawal amount is ₹1.20 crore, TDS is required only on ₹20 lakh and not on the entire ₹1.20 crore.
The wording of this provision is therefore important, as it follows the “amount exceeding the limit” concept rather than a simple threshold-based applicability model.
For more details, it is advisable to consult and tax professionals.