Deduction of income-tax at source from interest other than ``interest on securities''--Section 194A of the Income-tax Act, 1961--Deduction from interest on time deposits with banks--Clarification regarding - Income Tax - 626/1992

Deduction of income-tax at source from interest other than ``interest on securities''--Section 194A of the Income-tax Act, 1961--Deduction from interest on time deposits with banks--Clarification regarding Circular No. 626 Dated 12/2/1992 Please refer to Board's Circular No. 617, dated 22nd November,1991 (See [1991] 192 ITR (St.) 277), regarding deduction of tax at source from interest other than "Interest on securities" under section 194A of the Income-tax Act with particular reference to the new provisions in relation to deduction of tax from interest on time-deposits with banks. 2. A question has arisen as to whether the interest paid/credited by banks on time-deposits from 1st April, 1991, to 30th September, 1991, has to be included for the purpose of deduction of tax at source after 1st October, 1991. It is clarified that since the provisions relating to tax deduction at source from interest on time-deposits with banks came into force with effect from 1st October, 1991, only the interest paid or credited after this date will be liable for deduction of tax at source at the specified rate. The interest paid/credited during the period 1st April, 1991, to 30th September, 1991, will be reckoned only for the purpose of seeing whether the aggregate interest paid/ credited during the financial year exceeds the limit of Rs.2,500 which will determine the liability to deduct tax at source from payments made/credited after 1st October, 1991. (Sd.) V.K. Bhatia, Director, Central Board of Direct Taxes.