Section 193 of Income Tax Act deals with the provisions related to TDS on interest on securities. A person paying any income as interest on securities shall deduct income tax at the rates in force on the amount of the interest payable;
Section 193 of Income Tax Act
at the time of credit of such income to the account of the payee or
at the time payment thereof in cash or by issue of a cheque or draft or by any other mode,
whichever is earlier.
A person responsible for paying interest on securities to a resident shall deduct TDS at the rate of 10%. The taxpayer can also apply to an assessing officer for no TDS or TDS at lower rate U/S 197.
Exceptions under section 193
Any interest payable on 4.25% National Defence Bonds, 1972, where a resident individual holds the bonds.
Any interest payable on 4.25% National Defence Loan, 1968 or 4.25% National Defence Loan, 1972 to an individual.
Interest payable on 7-year national Savings Certificates
Any interest payable on National Development Bonds
Any interest payable on any securities of the Central Government or State Government, other than 8% Savings Bonds, 2003. However, there is no deduction of tax if interest payable on such bonds is less than Rs. 10000 for the FY.
Any interest payable to LIC/GIC companies formed under General Insurance Business Act/any other insurer; in respect of any securities owned by it or in which it has been beneficial interest.
Any interest payable on such debentures, issued by any institution or authority, or any public sector company, or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank); as the Central Government may, by notification in the Official Gazette, specify in this behalf.
Any interest payable on any security of the Central Government or a State Government.
Any interest payable on debentures which a company issues in which the public are substantially interested; being debentures listed on a recognized stock exchange in India in accordance with the Securities Contracts Act, 1956, and any rules made thereunder, if;
– The company pays the interest by an account payee cheque.
– The company pays or likely to pay the amount of such interest or, as the case may be, the aggregate of the amounts of such interest during the FY to such individual is less than or equal to Rs. 5000.
If the payee not being a company or a firm, furnishes form 15G or form 15H, there is no deduction of tax. He must send the copy of such form to the commissioner on or before the 7th day of the month next following the month in which the declaration is furnished to him.
No deduction of tax if the payee has obtained a certificate from the assessing officer for no deduction or lower deduction of tax.
In case the recipient does not furnish his PAN; the deductor has to deduct TDS at the higher of the following:
– At the rates in force
– At the rate specified in the relevant provision of the Income Tax Act
Otherwise, 10% if he satisfies the above conditions. However, an assessee can apply for no TDS or TDS at a lower rate to an assessing officer.
Due Date for non-government deductor
Where the non-government deductor deduct tax from the interest, he shall pay to the credit of the Central Government:
On or before 7 days from the end of the month in which it deducts tax, if it deducts the tax during the month of April to February.
On or before the 30th day of April, it it deducts tax during the month of March.
If any person liable to deduct TDS, does not deduct or if fails to pay any part or the whole of the tax to the credit of the government, then as per section 201, he is liable to pay simple interest at 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted. He shall have to pay interest at 1.5% for every month or part of a month on the amount of such tax from the date on which he deducted such tax to the date on which he actually pays such tax to the credit of the government. Thus, for the delay in deduction, interest will be levied at 1% and for the delay in payment after deduction; interest will be levied at 1.5%.