TDS on interest paid by banks on deposits of Co-op. Milk Federations, Educational Institutions, Charitable Trusts, trade unions, scientific research association, Local Authorities etc. 

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Provisions of TDS on interest u/s 194A(1)

TDS on interest paid by banks on deposits of Co-op. Milk Federations, Educational Institutions, Charitable Trusts, trade unions, scientific research association, Local Authorities etc. 

Provisions of TDS on interest u/s 194A(1) shall not apply in case of institutional depositors of the nature specified above under following circumstances:

  1. Interest paid /credited by Co-operative society (Bank) to any other co-operative society [Sec. 194A(3)(v)]
  2. Interest paid /credited to an entity whose income is unconditionally exempt under the Income Tax Act; [Circular 4/2002 dt. 16.07.02]
  3. Institution, association or body which the Central Govt. may notify in this behalf in the official Gazette; [Section 194A(3)(iii)(f)]
  4. In rest of the cases, on furnishing of certificate in form No. 13 [obtained from AO] by payee to the payer [S. 197 r.w. Rule 28 and Rule 28AB]

NOTE:

  • Funds/ authorities/ Boards/bodies/institutions etc. whose income is unconditionally exempt under the Income-tax Act and who are statutorily not required to file return of income as per section 139 of the Income-tax Act are listed in CBDT Circular No. 18 of 2017 dt. 29.05.2017]
  • Central Govt. Notified entities under section 194A(3)(iii)(f) of the Act: [Not. No. 170 dt. 22.10.70]

 (i)  any corporation established by a Central, State or Provincial Act;

(ii)  any company in which all the shares are held (whether singly or taken together) by the Government or the Reserve Bank of India or a Corporation owned by that Bank; and

(iii)  any undertaking or body, including a society registered under the Societies Registration Act, 1860 (21 of 1860), financed wholly by the Government.

CONCLUSION:

 

Thus, if the payee falls in any of the above categories (a) to (d) above read with notes, it shall not be liable for TDS on interest income from payer.


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vinaykawdia
Author is a Chartered Accountant Partner with M/S Kawdia Parakh & Associates Jalgaon, Published six papers in National Journal of ICAI – The Chartered Accountant on various issues under Direct Taxes. Actively contributed in various projects of WIRC of ICAI on Direct Taxes as a member of Direct Taxes Committee of WIRC for 2015-16

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