From 1 April 2026, TDS on cash withdrawals undergoes a major change - the new Section 393 under Income-tax Act, 2025 replaced the earlier Section 194N . Under the new Act if withdrawal limit is crossed, then TDS will apply on the entire cash withdrawal amount instead of only the amount exceeding the threshold The Big Shift in TDS Deductions: "Excess" vs. "Entire" Amount The most transformative change under Section 393 isn't the tax rate itself, it's the base on which tax is calculated once you cross the threshold. Under the Old Act (until March 31, 2026): TDS was levied only on the portion of cash withdrawals that exceeded the specified limit. Under the New Act (from April 1, 2026 onwards): The moment you breach the threshold, the bank must deduct TDS on the entire cumulative cash withdrawal amount, calculated right from the very first rupee withdrawn during the year. Example: Old Vs New Deduction Rule for Cash Withdrawals For regular Income Tax Return (ITR) filers, the threshold stands at ₹1 Crore per bank per financial year, with a TDS rate of 2%. Now, see how the numbers change if you withdraw ₹1.10 Crore: Thresholds Based on ITR Filing Status Your applicable TDS rates and limits under Section 393 are determined entirely by your tax compliance record over the preceding three years: For Regular ITR Filers Threshold: ₹1 Crore (₹3 Crores for Co-operative Societies). Rate: 2% on the entire amount once the threshold is breached. For Non-Filers (Those who have not filed ITR in the last 3 years) To penalize non-compliance, the government has drastically reduced the threshold: Withdrawals between ₹20 Lakhs and ₹1 Crore: 2% TDS on the entire amount. Withdrawals exceeding ₹1 Crore: 5% TDS on the entire amount. New Payment Codes for TDS on Cash Withdrawals 2026 For deductors, including banks, co-operative societies, and post offices, new payment codes under Section 393 will now be used in TDS returns and back-office classification. Important Points to Remember Exempt Entities: The government, banks, post offices, and authorized business correspondents are exempt from this TDS provision. No PAN: If you fail to provide your PAN, TDS will be deducted at the higher rate of 20% under Section 206AA. Returns: Banks are required to file quarterly TDS statement Form 140 to report tax deducted u/s 194N on cash withdrawals made to resident taxpayers. TDS Certificate: You will receive a TDS certificate ( Form 131 ) from the bank or post office for the tax deducted. Claiming Credit: You can claim credit for this TDS while filing your Income Tax Return. The Income-tax Act, 2025 restructures the TDS provisions, with Section 393 serving as a consolidating provision that sets out various TDS payments and their corresponding tables. Within this revamped framework, the cash withdrawal TDS earlier covered under Section 194N has been reassigned with a new mapping, including specific payment codes for reporting purposes. Under the post-restructuring scheme: Cash withdrawals and similar payments made by banks or post offices are now referenced in the Section 393(3) tables, complete with dedicated serial numbers and payment codes. The economic parameters thresholds, rates, and exclusions continue to mirror the earlier Section 194N provisions, unless modified by subsequent Budget announcements or Rules. What is TDS on cash withdrawal under Section 194N? Under Section 194N, TDS has to be deducted from a person in a financial year if cash withdrawal exceeds ₹20 lakh or ₹1 crore depending on the taxpayer's ITR filing status. Who deducts TDS on cash withdrawals? Private, public, co-operative banks, and post offices deduct TDS at the time of cash withdrawal when it crosses ₹20 lakh or ₹1 crore threshold in a financial year. Who is exempt from TDS on cash withdrawal under 194N? The Central/State Government, banks, post offices, certain RBI-authorized entities and other notified persons are exempt. Since when is Section 194N applicable? Section 194N has been applicable from 1st September 2019 (FY 2019-20). What is the TDS rate on cash withdrawals? The TDS rate on cash withdrawals are: ITR filed (all or any of the last 3 AYs): 2% on withdrawals above ₹1 crore

ITR not filed: 2% on withdrawals above ₹20 lakh, and 5% above ₹1 crore Why did I get a bank SMS saying "tax deducted at source u/s 194N"? This means your bank has deducted TDS as your withdrawals crossed the ₹20 lakh or ₹1 crore limit for the year under Section 194N. You can check the deducted amount in your Form 26AS and claim credit for it while filing your ITR. About the Author Chaitra Seetharam Finance Professional I write on Income Tax, TDS, ITR filing, banking rules, investment schemes, and financial law updates in India. My articles simplify complex tax provisions, compliance requirements, and policy changes to help taxpayers, professionals, senior citizens, and businesses stay informed and financially aware. Related Articles Popular Articles SBI Savings Account Interest Rate For September 2026: Know How Much You Can Earn? Income Tax Refund Delay Reasons for AY 2026-27 Life Certificate for Pensioners 2026: Eligibility, Benefits and Check Who Can Submit? Cheque Book New Rules 2026: Check If Your Old One Is Still Valid? Tax Audit Rules 2026: New Changes, Limits, Forms and Due Dates Explained SBI Savings Account New Rule: Major Update in ATM Withdrawals From October 2026 TDS on Purchase of Goods Above Rs 50 Lakh: Rules Under Income Tax Act 2025 New Bank Rules 2026: Changes in Nominee, FD, KYC, Fraud and Loan Process Trending Online Classes Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27 CA Arvind Tuli Enroll Now Direct Tax Laws & International Taxation May 26,Sept 26 & Jan 27 Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27 CA Aarti Lahoti Enroll Now Audit Fast Track Recorded Batch For May 26,Sept 26 & Jan 27 DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English CA Bhanwar Borana & CA Shubham Keswani Enroll Now DT & Audit (Exam Oriented Fastrack Batch) - For May 26 Exams and onwards Full English You can also submit your article by sending to article@caclubindia.com Browse by Category Info Technology Professional Resource Latest Job Openings K R Kiran Kumar & Associates A Jaiswal and company Aviv Global Pvt Ltd ANIVESH CONSULTANTS LLP CA ANOOP P K & ASSOCIATES Resollect Technologies Pvt Ltd YMW COMPLIANCE SERVICES LLP India's largest network for finance professionals