TDS on Interest

Section 193 – TDS on Interest

Section 193 deals with the provisions relating to TDS on interest on securities. Before going to the section lets understand what Interest on Securities means

As per section 2(28B) of the Income Tax Act, “interest on securities” means any 

  • interest on security (issued by the government whether state or central) and 
  • interest on debentures/securities (issued by the company a corporation or local authority established by Central, State or Provincial act).

So, if you receive any income which falls under the Interest on Security definition then TDS u/s 193 will be deducted

Who shall deduct TDS on interest on securities?

Every person who is responsible to pay interest on securities is liable to deduct tax at source under section 193.

What is the Rate tax deduction u/s 193?

The payer shall deduct tax at the rate of 10% from the sum of interest. 

However, if the payee does not furnish his Permanent Account Number (PAN), then the payer has to deduct tax at the higher of the following:

  • Rate specified in the relevant provision of the Income-tax Act.
  • The rate or rates in force, i.e., the rate prescribed in the Finance Act.
  • At the rate of 20%.

What is the Time of tax deduction u/s 193?

The time of deduction is earlier of, 

  • Credit of income to the account or 
  • Actual payment (in cash, cheque, draft or other modes).

What is the Due date of depositing TDS to the government?

ParticularTime limit to deposit TDS
If the amount is credited in the month of MarchOn or before 30th April
If the amount is credited in the month other than MarchWithin 7 days from the end of the month is which deduction is made

Penalty on Late Remittance of TDS to Government

Late Deduction 

In case, TDS has been deducted but not deposited to the government then in that case interest will be levied @1.5%per month or part of a month on the amount of TDS from the date in which TDS was deducted to the date in which TDS was deposited.

Late Payment  

In case, TDS has not been deducted then that case interest will be levied @1%per month or part of a month on the amount of TDS from the date in which TDS was deducted to the date in which TDS was deposited.

No requirement of deducting TDS u/s 193 in the following cases:

  • Interest payable on debentures issued by the notified institution, authority, public sector company or co-operative society.
  • Interest payable to LIC/ other insurers on securities owned by them or in which they have full beneficial interest.
  • Interest payable on security (which is in demat form) issued by a company listed on stock exchange in India
  • Interest on 7 year National Savings Certificate (IV issue).
  • Interest on the National Development Bonds
  • Interest on 4% National Defence Loan, 1968 or National Defence Loan, 1972 held by an Individual.
  • Interest on 4% National Defence Bonds, 1972 held by a resident Individual.
  • Interest to the GIC (General Insurance Corporation) on the securities owned by it or in which it has a full beneficial interest.
  • Interest on 6 % Gold Bonds, 1977 or 7% Gold Bonds, 1980 held by a resident Individual only if the total nominal value of the bonds didn’t exceed INR 10,000 at any time during the period to which the interest relates.
  • Interest on Security of the Central Government or a State Government
  • Interest to any other insurer on the securities owned by it or in which it has a full beneficial interest.

TDS Certificate

The due dates for receipt of TDS certificates are as below:

TDS for the QuarterDue-Date
April-June15th August
July-September15th November
October-December15th February
January-March15th June

 TDS Return

The Deductor liable to deduct tax under section 193 of the Income Tax Act shall file quarterly return in Form 26Q within the following due dates:

QuarterDue-Date
April to June31st July
July to September31st October
October to December31st January
January to March31st May

FAQ’s

Is TDS applicable on interest paid to NBFC?

Ans: Yes, interest paid to the banks is only on the negative list under section 194A.

Is it mandatory to file a TDS return by Deductor?

Yes. It has to be filed on a Quarterly Basis

Published By: akash On 07/28/21 2:21 PM