The person responsible for paying interest on securities to a resident is required to deduct TDS.
Tax is to be deducted at the time of payment or credit to the account of the payee, whichever is earlier. Where any amount of interest is credited to any account whether called Interest payable account or suspense account or any other name, provisions of this section shall apply and tds is to be deducted.
Tax is to be deducted at the rate of 10%. If the recipient of income doesn’t furnish his PAN to deductor then TDS is to be deducted @ 20%.
Assessee can apply to assessing officer for no TDS or TDS at lower rate under Section 197.
Tax is not required to be deducted in following cases
- When the deductee gives a declaration in form no. 15G or 15H
- Interest on debentures is paid to resident individual or resident HUF if
- Debentures issued by a company in which public are substantially interested
- Interest is paid by account payee cheque
- The aggregate amount of interest paid or likely to be paid by the company to the debenture holder does not exceed Rs. 5,000.
- Interest payable to funds established for the benefits of armed forces – Circular no. 735 dated 30 Jan, 1996.
- Interest to provident funds whose income is exempt under 10(25)(ii) – Circular no. 741 dated 18 April, 1996.
- Interest on deep discount bond is deductible at the time of redemption – Circular no. 4/2004, dated may 13, 2004
- Interest on debentures issued by any co-operative society ( including a co-operative land mortgage bank or a co-operative land development bank) or any other institution or authority or public sector company as notified by the central government.
- Ineterest on any security of central or state government. However interest on 8% savings (taxable) bonds, 2003 exceeding rs. 10,000 during the financial year is liable for tax deduction under this section.
- Any interest payable to LIC, GIC or its subsidiaries or any other insurer in respect of securities which is owned by them or in which they have full beneficial interest
- Interest on security which is in dematerialised form and which is listed in a recognised stock exchange.