These two TDS sections don't get anywhere near as much attention as TDS on salary or rent, but they quietly affect two very different groups — anyone who withdraws large amounts of cash, and every seller who does business through an online marketplace.
Quick Summary
- 194N: 2% TDS on cash withdrawal above ₹1 crore in a year from a bank account
- 194O: 0.1% TDS deducted by e-commerce operators on payments to online sellers
- New Income-tax Act 2025: 194N → Section 393(3); 194O → Section 393(1)
Section 194N — TDS on Cash Withdrawal
If your aggregate cash withdrawal from one bank, co-operative bank, or post office account crosses ₹1 crore in a financial year, the bank deducts 2% TDS on the amount above ₹1 crore. This isn't an additional tax — it's simply withheld and can be claimed as a credit when you file your ITR.
- General case: 2% TDS on cash withdrawal above ₹1 crore/year
- Stricter thresholds for anyone who hasn't filed ITR for the preceding relevant years: TDS can start from a lower threshold and at a higher rate — banks apply this automatically based on your PAN's filing history flag
- This is deducted per account per bank — if you hold accounts across multiple banks, each bank applies the ₹1 crore threshold independently
Section 194O — TDS on E-commerce Operator Payments
| Scenario | Rate |
|---|---|
| Seller has furnished PAN/Aadhaar | 0.1% |
| Seller has not furnished PAN/Aadhaar | 5% |
| Individual/HUF seller, gross sales ≤ ₹5 lakh via that operator (with PAN furnished) | Nil |
| Company, firm, or LLP seller | 0.1% from the first payment — no ₹5 lakh exemption |
Why 194O Matters for Anyone Selling Online
If you sell through Amazon, Flipkart, or any e-commerce platform, the operator deducts this TDS at source on the gross amount paid to you (including the commission/platform fee they later deduct) — so your bank credit and your actual gross sales figure won't match exactly, and that TDS shows up in your Form 26AS/AIS to be claimed while filing your ITR.
New Income-tax Act 2025 — Section Numbers
Same Rates, New Numbers
Under the Income-tax Act, 2025 (effective 1 April 2026), Section 194O is consolidated into Section 393(1), and Section 194N into Section 393(3) — both retain identical rates and thresholds; only the section reference on TDS certificates and returns changes going forward.
For e-commerce sellers, tracking 194O TDS credit properly against your GST turnover and income tax return is essential — mismatches here are a common trigger for scrutiny. Rajput Lalit & Associates handles ITR filing for online sellers, freelancers, and businesses with multiple TDS credits. See our GST for E-commerce Sellers guide for the GST-side TCS obligation, or book a free consultation.
Frequently Asked Questions
If TDS is deducted under 194N, do I lose that money?
No — it's a credit, not an extra cost. The 2% deducted shows up in your Form 26AS/AIS and can be claimed as TDS credit while filing your income tax return, reducing your final tax payable (or increasing your refund).
Does 194N apply to withdrawals from a savings account and a current account differently?
The ₹1 crore threshold and 2% rate generally apply per account regardless of account type, though some specific relaxations exist for certain categories of account holders (like specified government bodies) — worth checking your specific case with a professional.
I sell on Amazon and my gross sales are ₹4 lakh this year — is TDS deducted?
If you're an individual/HUF seller with gross sales through that one e-commerce operator at or below ₹5 lakh, and you've furnished your PAN, no 194O TDS should be deducted. Cross that ₹5 lakh mark and 0.1% starts applying.
Is 194O TDS the same as GST TCS on e-commerce sales?
No — they're entirely separate. Section 194O is an income-tax TDS deducted by the e-commerce operator on your gross payment; GST TCS (under Section 52 of the CGST Act) is a separate 0.5% GST-side collection. Both can apply on the same transaction, tracked in different systems (Form 26AS for TDS, GSTR-8/your GSTR-2A for TCS).
What if my e-commerce operator deducted 5% instead of 0.1%?
That usually means your PAN/Aadhaar wasn't correctly furnished or linked on the platform at the time of payment — check and update your KYC details with the platform; the higher deduction can still be claimed as credit in your ITR, but it's worth fixing to avoid it recurring.
TDS rates and thresholds under Sections 194N and 194O (and their Income-tax Act 2025 equivalents) are subject to Finance Act amendments. This article reflects the commonly-cited position as of September 2026 — please verify your specific situation with a tax professional.