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TDS from Interest on Securities – Sec 193

U.C Date : 25 Feb 2015

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

  1. When the deductee gives a declaration in form no. 15G or 15H
  2. Interest on debentures is paid to resident individual or resident HUF if
    1. Debentures issued by a company in which public are substantially interested
    2. Interest is paid by account payee cheque
    3. The aggregate amount of interest paid or likely to be paid by the company to the debenture holder does not exceed Rs. 5,000.
  3. Interest payable to funds established for the benefits of armed forces – Circular no. 735 dated 30 Jan, 1996.
  4. Interest to provident funds whose income is exempt u/s 10(25)(ii) – Circular no. 741 dated 18 April, 1996.
  5. Interest on deep discount bond is deductible at the time of redemption – Circular no. 4/2004, dated may 13, 2004
  6. 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.
  7. 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.
  8. 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
  9. Interest on security which is in dematerialised form and which is listed in a recognised stock exchange.

Also Read:

Bare Act for Sec 193

Bare Act for Sec 193

The person responsible for paying  [to a resident] any income  [by way of interest on securities] shall,  [at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier], deduct income-tax at the rates in force on the amount of the interest payable :

[Provided that no tax shall be deducted from—

(i)  any interest payable on 4¼ per cent National Defence Bonds, 1972, where the bonds are held by an individual, not being a non-resident; or

[(ia)  any interest payable to an individual on 4¼ per cent National Defence Loan, 1968, or 4¾ per cent National Defence Loan, 1972; or] [(ib)  any interest payable on National Development Bonds; or]

(ii)

[(iia)  any interest payable on 7-Year National Savings Certificates (IV Issue); or] [(iib)  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;]

(iii)   any interest payable on 6½ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, where the Bonds are held by an individual not being a non-resident, and the holder thereof makes a declaration in writing before the person responsible for paying the interest that the total nominal value of the 6½ per cent Gold Bonds, 1977, or, as the case may be, the 7 per cent Gold Bonds, 1980, held by him (including such bonds, if any, held on his behalf by any other person) did not in either case exceed ten thousand rupees at any time during the period to which the interest relates;

(iiia)

[(iv)  any interest payable on any security of the Central Government or a State Government:] [Provided that nothing contained in this clause shall apply to the interest exceeding rupees ten thousand payable on 8% Savings (Taxable) Bonds, 2003 during the financial year;] [(v)  any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if—

(a)  the amount of interest or, as the case may be, the aggregate amount of such interest paid or likely to be paid on such debenture during the financial year by the company to such individual or Hindu undivided family does not exceed five thousand rupees; and

(b)  such interest is paid by the company by an account payee cheque;] [(vi)  any interest payable to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), in respect of any securities owned by it or in which it has full beneficial interest; or

(vii)  any interest payable to the General Insurance Corporation of India (hereafter in this clause referred to as the Corporation) or to any of the four companies (hereafter in this clause referred to as such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any securities owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest; or

(viii)  any interest payable to any other insurer in respect of any securities owned by it or in which it has full beneficial interest;] [(ix)  any interest payable on any security issued by a company, where such security is in dematerialised form and is listed on a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the rules made thereunder.] [Explanation .—For the purposes of this section, where any income by way of interest on securities is credited to any account, whether called “Interest payable account” or “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.]

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