Rate of TDS on Interest Income under section 194A of the Income Tax Act

NATURE OF PAYMENT

Interest other than Interest on Securities

EXCEPTIONS: Check TDS Rates Chart For Year 2013-14


No tax shall be deducted in the following cases –

  1. Where the payee is –
  • Any banking company/ co-operative land mortgage bank.
  • Any financial corporation
  • LIC / UTI
  • Any company or society carrying on insurance business
  • Any other notified institution
  1. Where the firm pays interest to its members
  2. Where a co-operative society pays interest to its members
  3. Where a co-operative society pays interest to another society
  4. Interest on notified deposit schemes of Post office, some notified deposits schemes are –

    PO RT A/c, PO time deposit A/c PO MIS, KVP, JVP, NSC

Note: The Senior Citizen Scheme is not notified under this list. Hence TDS shall be necessary. Where a bank or a co-operative bank pays or credits interest on deposits other than time deposits.View Form 26AS TDS Deduction Status Online


Note:

  1. If a bank / co-operative bank pay interest on time- deposit, TDS shall be necessary. Here tie deposit means deposit (other than recurring deposits) repayable on expiry of fixed periods.
  2. Where a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank pays or credits interest on deposits.
  3. Where interest is paid or credited by the central Govt. under different provisions of direct taxes.
  4. Where interest is paid on compensation amount awarded by the Motor accidents claims tribunal provided the amount of interest during a financial year does not exceed Rs. 50,000/-
  5. Interest payable on Zero coupon Bonds
  6. Interest payable by a offshore Banking unit (OBU) to NOR on deposits or Borrowings
  7. In all other cases, if the total amount of interest payable during financial year does not exceed the prescribed limit, as discussed below:

If the payer is (i) a bank, (ii) a co-operative bank, (iii) post office — 10,000/-

If the payer is any other person – 5,000/-

Note: If the payer is bank / co-operative bank / housing finance company, the exemption limit of Rs. 10000 or 50000 shall be applied separately to each branch of payer.

Adjustment of excess / deficiency:

The payer can increase or reduce of amount of TDS so as to adjust previous excess / short deduction during the same year.

Rate of TDS on Interest on Debenture, Bonds and other Listed Securities under section 193 of the Income Act

Nature Of Payment

“Interest of securities”

EXCEPTIONS:

  • Interest payable on notified debenture, bonds and other securities

    For Example, National defence Bonds, 1972; National defence Loans, 1972 National developments Bonds

  • Interest payable on securities of Central Govt. / State Govt.[However TDS is necessary in case of 8% saving (Taxable) Bonds,2003]
  • Interest on debenture, if following conditions are satisfied:-
    • Payee is an individual
    • Payer is a widely-held company
    • Debenture are listed on a recognized stock exchange in India
    • Payment is made by an “A/c payee” cheque
    • The amount of interest payable during a financial year does not exceeds Rs.2500/-
  • If the payee is –
    • A fund established for the benefit of armed forces;
    • Ramakrishna mission;
    • Regimental funds;
    • Employee’s provident funds
    • LIC,GIC and other insurer.

Interest payable on any security issued by a company, where such security is in dematerialized from and is listed on a recognized stock exchange in India.