Section 194A - Interest other than Interest on securities - Income-tax Act, 1961

1 [Interest other than Interest on securities . 194A. (1) Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income 2 [by way of interest on securities], shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force : 3 [Provided that an individual or a Hindu undivided family, whose total sales, gross receipts or turnover from the business or profession carried on by him exceed 33 [ one crore rupees in case of business or fifty lakh rupees in case of profession ] during the financial year immediately preceding the financial year in which such interest is credited or paid, shall be liable to deduct income-tax under this section.] 4 [ Explanation . -For the purposes of this section, where any income by way of interest as aforesaid is credited to any account, whether called Interest payable account or Suspense account or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.] (2) 5 [ Omitted by the Finance Act, 1992, w.e.f. 1-6-1992 . ] (3) The provisions of sub-section (1) shall not apply- 6 [( i ) where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid or likely to be credited or paid during the financial year by the person referred to in sub-section (1) to the account of, or to, the payee, 7 [ does not exceed- (a) 32 [ forty thousand ] rupees, where the payer is a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act); (b) 32 [ forty thousand ] rupees, where the payer is a co-operative society engaged in carrying on the business of banking; (c) 32 [ forty thousand ] rupees, on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf; and (d) five thousand rupees in any other case ] :] 8 [Provided that in respect of the income credited or paid in respect of- ( a ) time deposits with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); or ( b ) time deposits with a co-operative society engaged in carrying on the business of banking; ( c ) deposits with a public company which is formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes 9 [and which is eligible for deduction under clause ( viii ) of sub-section (1) of section 36] 10 [***], 11 [* * *] the aforesaid amount shall be computed with reference to the income credited or paid by a branch of the banking company or the co-operative society or the public company, as the case may be;] 26 [Provided further that the amount referred to in the first proviso shall be computed with reference to the income credited or paid by the banking company or the co-operative society or the public company, as the case may be, where such banking company or the co-operative society or the public company has adopted core banking solutions; ] 31 [ Provided also that in case of payee being a senior citizen, the provisions of sub-clause (a), sub-clause (b), and sub-clause (c) shall have effect as if for the words 32 [ forty thousand ] rupees , the words fifty thousand rupees had been substituted. 34 [****] ] ( ii ) 12 [***] ( iii ) to such income credited or paid to- ( a ) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or ( b ) any financial corporation established by or under a Central, State or Provincial Act, or ( c ) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or ( d ) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or ( e ) any company or co-operative society carrying on the business of insurance, or ( f ) such other institution, association or body 13 [or class of institutions, associations or bodies] which the Central Government may, for reasons to be recorded in writing, notifyin this behalf in the Official Gazette; 35 [ Provided that no notification under this sub-clause shall be issued on or after the 1st day of April, 2020. ] 14 [( iv ) to such income credited or paid by a firm to a partner of the firm;] ( v ) to such income credited or 27 [ paid by a co-operative society (other than a co-operative bank) to a member thereof or to such income credited or paid by a co-operative society ] to any other co-operative society;] 28 [ Explanation. -For the purposes of this clause, co-operative bank shall have the same meaning as assigned to it in Part V of the Banking Regulation Act, 1949 (10 of 1949);] 16 [( vi ) to such income credited or paid in respect of deposits under any scheme framed by the Central Government and notifiedby it in this behalf in the Official Gazette; 17 [( vii ) to such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act); ( viia ) to such income credited or paid in respect of,- ( a ) deposits with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank; ( b ) deposits (other than time deposits made on or after the 1st day of July, 1995) with a co-operative society, other than a co-operative society or bank referred to in sub-clause ( a ), engaged in carrying on the business of banking;] 18 [( viii ) to such income credited or paid by the Central Government under any provision of this Act or the Indian Income-tax Act, 1922 (11 of 1922), or the Estate Duty Act, 1953 (34 of 1953), or the Wealth-tax Act, 1957 (27 of 1957), or the Gift-tax Act, 1958 (18 of 1958), or the Super Profits Tax Act, 1963 (14 of 1963), or the Companies (Profits) Surtax Act, 1964 (7 of 1964), or the Interest-tax Act, 1974 (45 of 1974);] 29 [(ix) to such income credited by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal; (ixa) to such income paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income paid during the financial year does not exceed fifty thousand rupees;] 20 [( x ) to such income which is paid or payable by an infrastructure capital company or infrastructure capital fund or 39 [ infrastructure debt fund or ] a public sector company 24 [or scheduled bank] in relation to a zero coupon bond issued on or after the 1st day of June, 2005 by such company or fund or public sector company 24 [or scheduled bank].] 25 [(xi) to any income by way of interest referred to in clause (23FC) of section 10.] 36 [ Provided that a co-operative society referred to in clause (v) or clause (viia) shall be liable to deduct income-tax in accordance with the provisions of sub-section (1), if- (a) the total sales, gross receipts or turnover of the co-operative society exceeds fifty crore rupees during the financial year immediately preceding the financial year in which the interest referred to in sub-section (1) is credited or paid; and (b) the amount of interest, or the aggregate of the amounts of such interest, credited or paid, or is likely to be credited or paid, during the financial year is more than fifty thousand rupees in case of payee being a senior citizen and forty thousand rupees in any other case. ] 21 [ Explanation 1 .- For the purposes of clauses ( i ), ( vii ) and ( viia ), time deposits means deposits ( 30 [including] recurring deposits) repayable on the expiry of fixed periods. 37 [ Explanation 2.- For the purposes of this sub-section, senior citizen means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year. ] Explanation 2 .- 22 [***]] 23 [(4) The person responsible for making the payment referred to in sub-section (1) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year.] 38 [ (5) The Central Government may, by notification in the Official Gazette, provide that the deduction of tax shall not be made or shall be made at such lower rate, from such payment to such person or class of persons, as may be specified in the said notification. ] Explanation.- [ Omitted by the Finance Act, 1992, w.e.f. 1-6-1992. ] ******************** Notes:- 1. Inserted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1967. 2. Substituted for 'chargeable under the head Interest on securities ' by the Finance Act, 1988, w.e.f. 1-4-1989. 3. Inserted by the Finance Act, 2002, w.e.f. 1-6-2002. Earlier the proviso was omitted by the Finance Act, 1992, w.e.f. 1-6-1992 and prior to omission, it read as under : Provided that no such deduction shall be made in a case where the person (not being a company or a registered firm) entitled to receive such income furnishes to the person responsible for making the payment- (a) an affidavit, or (b) a statement in writing, declaring that his estimated total income assessable for the assessment year next following the financial year in which the income is credited or paid will be less than the minimum liable to income-tax. 4. Inserted by the Finance Act, 1987, w.e.f. 1-6-1987. 5. Prior to omission, sub-section (2) was amended by the Finance Act, 1968, w.e.f. 1-4-1968. 6. Substituted by the Finance Act, 1975, w.e.f. 1-4-1975. Section 20(2) of the Finance Act, 1975 makes an independent provision relating to substitution of clause (i). Sub-section (2) of section 20 read as under : '(2) Notwithstanding the substitution of clause (i) of sub-section (3) of section 194A of the Income-tax Act, by sub-section (1) of this section nothing in section 201 or section 276B of that Act shall apply to, or in relation to, any failure to deduct income-tax under sub-section (1) of the said section 194A on any income by way of interest other than income chargeable under the head Interest on securities credited or paid on or after the 1st day of April, 1975, but before the 1st day of June, 1975, where the income so credited or paid at any one time does not exceed four hundred rupees.' 7. Substituted for does not exceed five thousand rupees: by the Finance Act, 2007, w.e.f. 1-6-2007. Earlier the quoted words were amended by the Finance Act, 1987, w.e.f. 1-6-1987 and Finance Act, 2000, w.e.f. 1-6-2000. 8. Substituted by the Finance (No. 2) Act, 1996, w.e.f. 1-10-1996. Prior to its substitution, proviso, as inserted by the Finance Act, 1995, w.e.f. 1-7-1995, read as under : 'Provided that in respect of the income credited or paid in respect of time deposits with a banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies (including any bank or banking institution referred to in section 51 of that Act) or with a co-operative society engaged in carrying on the business of banking, the provisions of this clause shall have effect as if for the words two thousand five hundred rupees , the words ten thousand rupees had been substituted and the aforesaid amount shall be computed with reference to the income credited or paid by a branch of the banking company or the co-operative society, as the case may be;' 9. Inserted by the Finance Act, 2000, w.e.f. 1-4-2000. 10. Words and which is for the time being approved by the Central Government for the purpose of clause (viii) of sub-section (1) of section 36 omitted by the Finance Act, 1999, w.e.f. 1-4-2000. 11. The following portion in the proviso omitted by the Finance Act, 2001, w.e.f. 1-6-2001 : 'the provisions of this clause shall have effect as if for the words two thousand five hundred rupees , the words ten thousand rupees had been substituted and' 12. Clause (ii) omitted by the Finance Act, 1999, w.e.f. 1-4-2000. Prior to its omission, clause (ii) read as under : (ii) to such income credited or paid before the 1st day of October, 1967; 13. Inserted by the Finance Act, 1968, w.e.f. 1-4-1968. 14. Reintroduced by the Direct Tax Laws (Amendment) Act, 1989, with retrospective effect from 1-4-1988. Earlier, it was omitted by the Direct Tax Laws (Amendment) Act, 1987, with effect from the same date. Original clause (iv) was inserted by the Finance Act, 1968, w.e.f. 1-4-1968. 15. Inserted by the Finance (No. 2) Act, 1971, w.e.f. 1-4-1971. 16. Inserted by the Finance Act, 1970, w.e.f. 1-4-1971. 17. Substituted for clause (vii) by the Finance Act, 1995, w.e.f. 1-7-1995. Prior to its substitution, clause (vii) was amended by the Finance Act, 1992, w.e.f. 1-6-1992, and the Finance (No. 2) Act, 1991, w.e.f. 1-10-1991. 18. Inserted by the Finance Act, 1975, w.e.f. 1-4-1975. 19. Inserted by the Finance Act, 2003, w.e.f. 1-6-2003. 20. Inserted by the Finance Act, 2005, w.e.f. 1-6-2005. 21 . Explanation 1 and Explanation 2 substituted for Explanation by the Finance Act, 2005, w.e.f. 1-6-2005. Prior to its substitution, Explanation , as inserted by the Finance Act, 1995, w.e.f. 1-7-1995, read as under : ' Explanation .-For the purposes of clauses (i), (vii) and (viia), time deposits means deposits (excluding recurring deposits) repayable on the expiry of fixed periods.' 22. Omitted by the Finance Act, 2006, w.e.f. 1-4-2006. Prior to its omission, Explanation 2 read as under: ' Explanation 2.- For the purposes of clause (x), infrastructure capital company and infrastructure capital fund shall have the meanings respectively assigned to them in clauses (a) and (b) of Explanation 1 to clause (23G) of section 10.' 23. Inserted by the Finance Act, 1975, w.e.f. 1-4-1975. 24. Inserted vide Finance (No.2) Act, 2009, w.e.f. 1-4-2009 25. Inserted vide THE FINANCE (No. 2) ACT, 2014w.e.f. 1st day of October, 2014 26. Inserted vide THE FINANCE ACT, 2015 w.e.f. 1st day of June, 2015 27. Substituted vide THE FINANCE ACT, 2015 w.e.f. 1st day of June, 2015, before it was read as, paid by a co-operative society 15 [to a member thereof or] 28. Inserted vide THE FINANCE ACT, 2015 w.e.f. 1st day of June, 2015 29. Substituted vide THE FINANCE ACT, 2015 w.e.f. 1st day of June, 2015, before it was read as, 19 [( ix ) to such income credited or paid by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal where the amount of such income or, as the case may be, the aggregate of the amounts of such income credited or paid during the financial year does not exceed fifty thousand rupees;] 30. Substituted vide THE FINANCE ACT, 2015 w.e.f. 1st day of June, 2015, before it was read as, excluding 31. Inserted vide THE FINANCE ACT, 2018 32. Substituted vide FINANCE ACT, 2019 w.e.f 01-04-2019 before it was read as ten thousand 33. Substituted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as the monetary limits specified under clause ( a ) or clause ( b ) of section 44AB 34.Omitted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 before it was read as Explanation.-For the purposes of this clause, senior citizen means an individual resident in India who is of the age of sixty years or more at any time during the relevant previous year; 35. Inserted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 36. Inserted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 37. Inserted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 38. Inserted vide Finance Act, 2020 dated 27-03-2020 w.e.f. 01-04-2020 39. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-04-2021