Section 194A - TDS on Interest other than "Interest on Securities" - Income Tax - Ready Reckoner - Income Tax

Section 194A : TDS ON INTEREST OTHER THAN INTEREST ON SECURITIES Who is liable to deduct TDS The person other than individual or HUF, who is responsible for paying to a resident any income by way of interest other than interest on securities, is required to deduct tax thereon at the rates in force. Individuals and HUF whose total sales/turnover/receipts from business or profession exceeds the limit prescribed u/s 44AB(a) or (b) are also required to deduct tax at source. Which time required to deduct TDS Tax is to be deducted at the time of payment of interest in cash or or by cheque or any other mode, whichever is earlier. Where any income by way of interest 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. Rate of TDS In case of PAN Furnished :- TDS rate 10% (no surcharge, health and education cess etc.) In case of PAN not furnished:- TDS rate 20% ( no surcharge, health and education cess etc.) Exception of Section 194A The provisions of this section shall not apply - (A) No tax is to be deducted where the aggregate amount of such interest to be paid or credited to the account of the payee during the FY does not exceed- ₹ 40,000 where payer is Banking Company. ₹ 40,000 where payer is a co-operative Society Bank. ₹ 40,000 on deposit with post office. ₹ 5,000 in any other case. 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 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, and which is eligible for deduction under section 36(1)( viii ) of 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. Where amount referred in 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; 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 40,000 rupees , the words 50,000 rupees had been substituted. Summary Whos is payer Interest is payable on From 1, June 2007 to 31st March 2018 when Payee is a senor citizen when payee is other person From 1st April,2018 During 2018-19 From 1st April 2019 Banking Company Time Deposit 10,000/- 50,000/- 10,000/- 40,000/- A Co-operative society engaged in carrying on the banking business Time Deposit 10,000/- 50,000/- 10,000/- 40,000/- Post office Notified scheme (i.e. Senior Citizen savings Scheme, 2004) 10,000/- 50,000/- 10,000/- 40,000/- Any other person - 5,000/- 5,000/- 5,000/- 5,000/- (B) Where such income is credited or paid to the following person, no tax is required to be deducted at source- any banking company or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank) any financial corporation established by or under a Central, State or Provincial Act the Life Insurance Corporation of India the Unit Trust of India any company or co-operative society carrying on the business of insurance such other institution, association or body which the Central Government may notify to such income credited by way of interest on the compensation amount awarded by the Motor Accidents Claims Tribunal, the aggregate of the amount of such income paid during the financial year does not exceed ₹ 50,000/- to any income by way of interest referred to in clause (23FC) of section 10 (C) Where such income credited or paid by a firm to a partner of the firm (D) Where such income is paid by a co-operative society to a member of a co-operative society or to another co-operative society (E) to such income credited or 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; (F) 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; However, a Corporative society referred to in (E) or (F) is liable to deduct tax 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 ₹ 5,000/- in case of payee being a senior citizen and forty thousand rupees in any other case. (G) Where a self declaration Form No. 15G / 15H is furnished by a particular person. Power to the central government to issue notification it is clarified that interest on FDRs made in the name of Registrar General of the Court or the depositor of the fund on the directions of the Court, will not be subject to TDS till the matter is decided by the Court. However, once the Court decides the ownership of the money lying in the fixed deposit, the provisions of section 194A will apply to the recipient of the income. [ Circular No. 23/2015 dated 28/12/2015 ] No deduction of TDS u/s 194A on payment made to a member of schedule Tribe referred u/s 10(26) by a Schedule Bank. [ Notification No. 110/2021 date 17.09.2021 ] Deduction of TDS on interest income accrued to minor child, where both the parents have deceased. [ Notification No. 05/2017 dated 29.05.2017 ] Deduction of TDS on interest on deposit made under Capital gain account scheme, 1988 where depositor has deceased [ Notification 08/2017 dated 13.08.2017 ] Deduction of TDS on interest on deposit made under Scheme namely the Mahila Samman Savings Certificate, 2023. [ Notification 27/2023 dated 16.05.2023 ] No deduction of tax shall be made under the provisions of section 194A, payment made by any payer to a person being a Unit of International Financial Services Centre in respect of following services Finance Company/ Finance Unit Interest income on External Commercial Borrowings /Loans [ Circular No. 28/2024 dated 07.03.2024 ]