Section 194N of the Income Tax Act, 1961, introduced in September 2019, mandates Tax Deduction at Source (TDS) on cash withdrawals exceeding specific limits. Here’s a breakdown:

Threshold limits for TDS deduction:

• ₹1 crore: If you’ve filed Income Tax Returns (ITRs) for any or all of the preceding three Assessment Years (AYs).
• ₹20 lakh: If you haven’t filed ITRs for all three preceding AYs.

TDS deduction rates:

• 2%: Applicable on cash withdrawals exceeding the threshold limit (as mentioned above) for taxpayers who have filed ITRs.
• 5%: Applicable on cash withdrawals exceeding ₹1 crore for taxpayers who haven’t filed ITRs for the preceding three AYs.

Who deducts TDS?

Banks, cooperative banks, and post offices are responsible for deducting TDS at the time of cash withdrawal if the amount exceeds the threshold limit.

Exceptions:

• TDS is not applicable to withdrawals made by the government, banking institutions, authorized business correspondents, white label ATM operators, and other persons notified by the government.