TDS Section-194A Interest Other than Interest on Securities
Section 194A mandates the deduction of TDS on interest income other than interest on securities. It covers interest earned on fixed deposits, recurring deposits, unsecured loans and advances, etc.
This includes interest from:
- Bank deposit
- Post office deposit
- Cooperative banks
- Loans and advance
- Deposit with NBFC
Threshold Limit:
| 50,000 | where the payer is a banking company to which the Banking Regulation Act, 1949 |
| 50,000 | where the payer is a co-operative society engaged in carrying on the business of banking |
| 50,000 | on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf |
| 10,000 | in any other case |
Authority who deduct TDS under section 194A:
- Companies
- Firm
- Cooperative Societies
- Banks
- Post office (notified schemes)
TDS rate:
Let’s understand with the legal provisions:
- 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 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.
- 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 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.
The provisions of sub-section shall not apply:
- 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 above to the account of, or to, the payee, does not exceed the threshold limit describe above.
In Exemptional case:
- In case of payee being a senior citizen, the threshold limit is exceeded to 100000 rupees.
Grant exemptions in case:
- Interest paid to banking companies, LIC, UTI, Insurance companies, etc
- Interest below threshold
Time limit of depositing TDS:
- Tax deduct during the financial year is to be deposited on or before the 7th date of next month.
- TDS deducted in month of March need to be deposited on or before 30th
In what case Tax is deducted at Nil or Lower rate?
- When declaration is submitted in form 15G/15H under section 194A.
These are the self-declaration forms that submitted to bank, post office or any TDS deductor to request for non-deduction of TDS on interest income. Form 15G is for residents below 60 years, HUF and certain trusts, and form 15H is for resident senior citizen (60 years old and above).
- This exemption was not applicable on NRI person.
Frequently asked questions:
- Who is liable to deduct under section 194A?
- Any person, other than individual or Hindu undivided family, making the payment of interest, other than securities. It also covers interest earned on fixed deposits, recurring deposits, unsecured loans and advances.
- Is Interest paid to partners deducted under Section 194A?
- Interest paid by the partners in firm is exempt from TDS deduction.
- When TDS under section 194A is to be deducted?
- When the amount crosses the threshold limit of 50000/- in a financial year.
- Does TDS applicable on EMI of Home Loans?
- TDS on the interest portion needs to be deducted under section 194A. i.e., if the EMIs are paid to any nationalized banks, then TDS provisions are not applicable.
- Is interest from savings banks subject to TDS under 194A?
- No, only fixed deposit and recurring deposit interest will be covered under this limit. Interest on saving bank accounts is exempt from TDS rules.