TDS ON INTEREST OTHER THAN
INTEREST ON SECURITIES
- What is Section 194A?
. Section 194A deals with deduction of TDS on interest other than
interest on securities like Interest on Deposits, Interest on Loans
and Advances other than banks.
. This Section is only applicable to a resident. Thus, the provisions
of section 194A are not applicable in case of payment of interest to
a non-resident.
. Payments made to non-residents are also covered under TDS
mechanism. However, tax in such a case is to be deducted as per
Section 195.
- When does TDS under Section 194A need to be
deducted?
The Payer/Deductor shall deduct TDS if the amount of such interest paid
or credited OR is likely to be paid or credited in a financial year, exceed
10,000 where the payer is
- a) Banking company or any bank or a banking institution
- b) Co-operative society engaged in the business of banking
- c) Post office (on deposit under scheme framed and notified by
Central Government).
- d) 5,000 in any other case
- e) From FY 2018-19 onwards no TDS will be deducted on interest
earned upto INR 50,000 by senior citizens. The interest amount
should be earned from the following:
. Deposits with banks;
. Deposits with post offices
. Fixed deposit schemes
. Recurring deposit schemes
- When is Tax deducted at NIL rate or lower rate?
This happens under the following scenarios:
- When a declaration is submitted in form 15G/15H u/s
197A If a declaration is submitted under Section 197A by the
recipient to the payer along with his/her PAN, then no tax is
deductible if the following conditions are satisfied:
- a) Recipient is a person other than a company OR firm
- b) Tax on total income of the previous year (PY) is NIL
- c) Total income does not exceed the exemption limit (i.e. for AY
2016-17, Rs.2,50,000 or Rs.3,00,000 or Rs.5,00,000, as
applicable). This condition is NOT applicable if the recipient is a
resident senior citizen.
- d) Such a declaration shall be given in duplicate form 15G (15H for
senior citizens). In case of Senior Citizens Saving Scheme, 2004
(SCSS), investors can submit the declaration.
- e) Nominees of investors of SCSS can also produce the declaration
at the time of payment after the death of the depositor.
- f) On submission of declaration to the bank, bank shall not deduct
tax (subject to the conditions) on payment of interest.
- When an application is submitted in Form 13 under
Section 197
- a) As per provisions of Section 197, the recipient can apply in
Form no.13 to the Assessing Officer to get a certificate
authorizing the payer to deduct tax at lower rate (or deduct no
tax, if certain conditions are satisfied).
- b) There is no time limit for application and it can be filed at any
time before actual deduction of tax. If the recipient does not
have PAN, he cannot apply for the certificate.
- c) The certificate shall be issued, directly to the person
responsible for paying income, on a plain paper, under an
advice to the applicant.
- d) The certificate cannot be issued with retrospective effect.
- e) The recipient may furnish copy of such certificate to the
person responsible for paying the income for lower/no
deduction of tax at source.
- What is the rate of TDS?
Following are the applicable rates of taxes:
. 10% when the PAN is furnished;
. 20% if the PAN is not provided.
. No surcharge, education cess or SHEC shall be added to the
above rates. Hence, tax will be deducted at source at the basic
rate.
- What is the time limit for depositing TDS ?
Tax Deducted during the month of April to February is to be deposited
on or before the 7th of next month. Tax Deducted in the month of March
is to be deposited on or before 30th April.
For example, tax deducted on 25 April is to be deposited on or before
7th May and tax deducted on 15 march is to be deposited on or before
30 April.
