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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