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TDS ON INTEREST ON SECURITIES [SECTION 193]

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Overview of Section 193: TDS on Interest on Securities

Section 193

Tax Deducted at Source (TDS) is a measure, in which person who are making payment of income are responsible to deduct tax from such income (at specified rates) and pay only net amount.

The TDS shall be deposited with the Government’s treasury within the stipulated time.

The payer will issue a certificate in Form 16 or 16A to the payee

The payee will get credit for TDS and his tax liability shall be reduced to that extent.

In nutshell, the provisions are merely a mode of collection of income tax and a check on tax evasion through proper control and information.

Section 193 provides for deduction of tax on payment of any income by way of interest on securities to a resident.

Who is responsible to deduct tax?

Any person responsible for payment of interest on securities (other than interest on Government securities and certain specified securities) to any resident person.

When tax shall be deducted?

The tax shall be deducted at the time of payment or crediting the payee, whichever is earlier.

Where any amount is credited to any account (for e.g. “Interest payable account” or “Suspense account”) instead of Payee account, such crediting shall be deemed to be credit of such income to the account of the payee.

Rate of TDS

10% (No surcharge & Health & Education Cess) both in the case of domestic companies and resident non-corporate assessees.

Exemption or relaxation from the provision of Section 193

  • When the recipient applies to the Assessing Officer in Form 13 and gets a certificate authorizing the payer to deduct tax at lower rate or deduct no tax; [Refer section 197]
  • When a declaration in Form 15G (in duplicate) is furnished by the assessee to the payer [Refer section 197A]

Form 15G

Non-applicability of TDS under Section 193

No tax deduction is to be made in following cases:

1. Interest payable to a resident-individual or a resident HUF on debentures is not subject to TDS provided following conditions are satisfied –

(a) Such debentures are issued by a company in which the public are substantially interested;

(b) Such debentures may be listed or unlisted

(c) The interest is paid by the company by an account payee cheque; and

(d) The amount of such interest payable during the financial year to such individual does not exceed Rs 5,000

2. Any interest payable on any security of the Central or State Government.

3. Any interest payable on any security issued by a company, where such security in dematerialised form and is listed on a recognised stock exchange.

4. Any interest payable on securities beneficially held by Life Insurance Corporation of India or General Insurance Corporation of India.

5. Any interest payable to Regimental Fund or non-Public Fund established by Armed Force [income of whose is exempt u/s 10(23AA)].

6. The amount of such interest does not exceed ₹10,000 in a F.Y., in case of interest on 8% Savings (Taxable Bonds, 2003/7.75% Savings (Taxable) Bonds, 2018.

Quick Summary of Section 193

Nature of payment Interest on Securities
Threshold Limit for deduction of tax at Source ₹10,000 in a F.Y., in case of interest on 8% Savings (Taxable Bonds, 2003/7.75% Savings (Taxable) Bonds, 2018.

₹5,000 in a F.Y., in case of interest on debentures issued by a Co. in which the public are substantially interested, paid or credited to a resident individual or HUF by an A/c payee cheque.

No threshold specified in any other case.

Payer Any person responsible for paying any income by way of interest on securities
Payee Any resident
Rate of TDS 10%
Time of deduction At the time of credit of such income to the account of the payee or at the time of payment, whichever is earlier.

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