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income tax act section 194a

Section 194A – TDS on Interest other than Interest on Securities

Payment on which TDS to be deducted

TDS is required to be deducted under this section for payment made for interest to a resident person. Interest payable on securities is not considered under section 194A but covered under Section 193.

TDS is deducted under section 194A only when payment is made to a resident, if such payment is made to non-resident then tax is to be deducted under section 195.

Examples of interest covered

  • Interest paid on loan taken from friend or relative
  • Interest paid by bank on loan taken
  • Any unsecured loan

The recipient can give From 15G/Form 15H to payer of interest so that TDS will not be deducted. Comprehensive guide to Form 15G/15H

Persons required to deduct TDS under Section 194A

Following persons are required to deduct TDS:-

  1. Individual and HUF who are liable to audit under audit under section 44AB in the preceding year. However only individual and huf who are liable for audit due to point (a) and (b) in section 44AB are required to deduct TDS.
  2. All other assessees i.e Partnership Firm, Company, AOP, BOI

Time of deduction

TDS  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.

Rate of deduction

TDS 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%. No surcharge, education cess or SHEC shall be added to the basic rates.

Section 194A of income tax act provides for deduction of tds on payment made regarding interest.

Payment By Rate of TDS Threshold Limit
Other than banks 10% (If PAN is furnished) Rs 5,000
Other than banks 20% (If PAN is not furnished) Rs 5,000
Banks 10% (If PAN is furnished) Rs 10,000
Banks 20% (If PAN is not furnished) Rs 10,000




TDS is not required to be deducted in following cases –

  1. Amount of such interest paid or credited, or is likely to be paid or credited in a financial year does not exceed
    1. 10,000 where the payer is a banking company, any bank, banking institution, co-operative society engaged in the business of banking, post office (on deposit under scheme framed and notified by Central Government). Such amount is calculated branch wise if such institution adopted core banking solutions.
    2. 5,000 in any other case.
  2. Interest credited or paid by a firm to a partner of the firm.
  3. Interest is paid or credited to any banking company, co-operative society engaged in banking business, public financial institutions, LIC, Unit Trust of India (UTI), a company or co-operative society carrying on the business of insurance or any institution Central Government notifies.
  4. Interest is paid by paid by a co-operative society (other than a co-operative bank) to a member thereof or to such income credited or paid by a co-operative society.
  5. Interest is paid or credited in respect of deposits under scheme framed by Central Government and notified in official Gazette.
  6. To such income credited or paid in respect of deposits (other than time deposits) with a banking company or co-operative society carrying on business of banking. In other words, saving account interest is not liable for tds deduction.
  7. Interest is paid by Central Government under any provisions of the income tax act or wealth tax act.
  8. Income credited or paid in respect of deposits with primary agricultural credit society or co-operative land mortgage bank or co-operative land development bank.
  9. Interest paid on compensation awarded by the Motor Accidents Claims Tribunal where the amount of such income or the aggregate of the amounts of such income credited or paid during the financial year doesnot exceed Rs. 50,000. Such interest if credited and not paid then whole amount of such interest credited without any condition.
  10. Interest is in relation to zero coupon bonds.
  11. Interest referred to in section 10(23FC).
  12. Discounting charges on export bill discounted is not treated as interest and thus not liable for tax deduction under section 194A.

The recipient can stop deduction of TDS on interest income by filling Form No. 15G/15H to the payer.

Assessee can apply to assessing officer for no TDS or TDS at lower rate under Section 197.

Interest on delayed payment of purchase bills – Whether TDS deductible

TDS is deductible under section 194A from payment made for interest (other than interest on securities). Now the question arises whether TDS is also deductible when interest is payable due to delayed payment of purchase bills.

Section 2(28A) defines interest as

2(28A) –  ” interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised.

From reading of the above section it can be concluded that interest paid for delayed payment of purchase bills cannot be considered as interest for income tax act.

In the case of ITO vs. Parag Mahasukhlal Shah, the Hon’ble tribunal (Ahmedabad Bench) held that a payment which has direct nexus with the trading liability being connected with the delayed purchase payments will not be regarded as Interest as defined in Section 2(28A).[2011 (46) SOT 302]

Similar view has been taken by the Hon’ble Tribunal (Hyderabad Bench) in case of Sri Venkatesh Paper Agencies (Hyd.) Pvt. Ltd. vs. DCIT. [ITA No. 636 of 2011].

Therefore it can be concluded that such interest doesn’t fall under section 194A and therefore no TDS is deductible under such a case.

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68 comments

  1. Hi,

    I am having a query regarding TDS on saving bank account’s interest.
    What if i have deposited 7 lakh in my saving bank account and i get around 30000 inr as an interest on it for a year. Will bank deduct TDS on it automatically ?
    I have got some rumors that from this financial year, banks will deduct TDS on saving account’s interest.
    Is that true ?
    Please tell if you have any updated info on this topic.

  2. Hi,

    I am having a query regarding TDS on saving bank account’s interest.
    What if i have deposited 10 lakh in my saving bank account and i will get around 40000 inr as an interest on it for a year. Will bank deduct TDS on it automatically ?
    I have got some rumors that from this financial year, banks will deduct TDS on saving account’s interest.
    Is that true ?
    Please tell if you have any updated info on this topic.

  3. Tushar Surana

    Hi,

    In Case if Interest is paid by Asset Management Company to a Investor for Delay in Redemption of its Investment Amount as per the SEBI Guidelines whether the Company is liable to deduct TDS on that Interest Amount under section 194 A

    • Prateek Agarwal

      This payment is specifically not excluded from TDS deduction, so i think TDS should be deducted from this amount if exceeding the threshold limits.

  4. If I come under 20% tax bracket and I have earned 18500 as interest, on which 1850 TDS is deducted @ 10% rate on entire amount. While filling returns I should show 8500 as amount earned (18500 -10000 limit =8500). On which tax should be 8500 x 20% (my tax bracket)=1700. Or it will be 20% on total amount? Please reply

    • Rohit Pithisaria

      You have to report total interest earned (without deducting TDS i.e. 18500). Rs 10,000 is only a threshold limit not an exemption of interest.

  5. Sanjip kumar Pradhan

    I changed my company on Oct 2014 before completing 5 yrs. But only on April 2016 I initiated for PF transfer to my current company. Now I got a form 16 from my previous company for yr 2015-16 where there is reduction of tax on the interest accumulated on my Pf account. Is it valid , if not can I file for refund during my return file?

  6. I accumulated around 95k in my PF account which i withdrew in May and employer deducted around 8.5k as it was few months sort of 5 years. In form 16A there is one tab amount paid/credited: 7800 and another tax deducted: 800. I am unable to get that. How much ll i get refund? Where should I give these details in return.

    • Prateek Agarwal

      Amount of rs. 800 is deducted from rs. 7800 paid to you.
      You will get refund of rs. 800.
      You have to show rs. 7,800 as income from other sources and rs. 800 as tds in tds section.

  7. Hi,

    I had changed job in Aug 2015 and opted for PF transfer.
    I got my PF transferred in May 2016. Interest accumulated on PF was 8000/-.

    I see that in my form 26AS Tax deducted was about 800/- under section 194A.

    Is this legal to deduct tax on PF in above situation? Under what income that 8000 comes for me?

    • Prateek Agarwal

      If you had left job before 5 years than such interest is taxable therefore tds should be deducted.
      However you can file return to claim such tds. Such income will be income from other sources.

    • Changed job in june 16 after serving for 7 years & could not get transfer PF account.
      When saw form 26 AS,Amount credited Rs 20000/ & TDS Rs.2000/.
      Is it legal to deduct theTax u/s 194A.Now what to do & if ok , where to show this amount & TDS.

      • Prateek Agarwal

        You can claim it in your itr.
        20,000 is to be shown as income from other sources and 2000 as tds deducted.

        • Hi, I have a similar case. Left job at my previous employer after 10+ years. TDS certificate (aslo on 26AS) from my previous employer shows TDS of 15,037 (10% of 150,373) under 194A. I will put 15037 as tax credit but do I show 150,373 as taxable ‘Other Income’ or Non-taxable ‘Other Income’. Because if I show this as Taxable Other Income then tax charged is at highest level and I am ending up paying more tax. Please advise.

          • Prateek Agarwal

            PF is not exempted from employer in all cases. If it is exempt from tax then no tds is deductible. So please check that it is taxable or not in your case and feed accordingly.

  8. I apply for HUDA plots and the application amount was provided by a bank as a loan. Due to delay in results, bank charged me interest at 12% p.a for the delayed period and huda paid interest to me at 6% p.a. Huda deducted TDS also under section 194A. This interest is technically not my income as i have paid more interest to bank then i got from Huda.

    Can you please help on below things –
    1) shall i show the interest got from HUDA as income.
    2) if yes, in which section shall i show it – i) income from other sources , ii) 80TTA or any other section

    Please help.

    • Prateek Agarwal

      Yes, you have to show such interest as income. but since you also paid interest for the same transaction you can claim such amount as deduction.
      This comes under the income from other sources.

  9. My wife (a housewife) is not an earning member. Is interest earned >10000 in bank f.d., in F Y , by her will be taxable?

  10. i had taken loan from Religare finvest ltd then tds will be payable or not on interest

    • Rohit Pithisaria

      TDS is not required to be deducted in case interest is paid to banking or financial company.

  11. Balkrishna Pednekar

    Hello
    kindly help me on dis .
    TDS is deducted for assessment year 2016-17.
    Under sec 194A for the period of july 2015 to sept 2015, RS 14900 is the taxable amount showing.
    Got letter from bank regarding this.
    What to do next.
    whether i have to pay this amt or it’ll get deduced from my bank account.
    PAN no. is attached.

    • Rohit Pithisaria

      Generally interest is credited to the account after deducting TDS,so bank should have paid TDS already. I think the letter which you have received from the bank is a TDS certificate. You are not require to do anything.

  12. will TDS still be deducted if I have received Rs 9000 interest on FD and Rs 2000 interest on Recurring deposit
    from the same bank during one financial year i.e, Apr-Mar

  13. If pan detail not given in bank and bank deduct 20% tds on interest and also not available 16a then how to claim refund and who liable for tds return revise pls suggest

    • Prateek Agarwal

      You will need form 16A to claim your tds amount. Otherwise no tds can be claimed.
      As you have not given your PAN to bank, they will not revise their returns.

      • but they said that they not given form 16a with PANNOTAVBL and i am also submitted my pan no. copy bank employee said no provision after once submitted tds return with PANNOTAVBL from F.Y. 2014-15
        Please help for this issue.

        • Prateek Agarwal

          Ask the bank to give you the certificate stating the amount of TDS deducted. The bank is liable to give you the certificate. Although it is not a form 16A because form 16A cannot be generated by bank in case PAN is not available.
          And submit it to assessing officer of your ward along with an application and pan card copy to give tds deduction.

          • Thank you Sir for your valuble reply and we honour your quick reply for suggest above issues.

  14. Hello sir.. IF I GET INTEREST 18000 IN A YEAR AND I HAVE NOT GIVEN MY PAN CARD DETAILS TO BANK. HOW MUCH TDS amount will be deducted from my interest..?what is the calculation ?

    Thanku in advance Sir.

    • Prateek Agarwal

      If pan is not given then TDS is to be deducted @ 20%.
      TDS is deducted on whole amount i.e 18000 x 20% = 3600

      • Thanks for the answer sir. If Its a savings account, then what will be the TDS amount to be deducted?

        • Prateek Agarwal

          TDS under section 194A is not applicable on saving bank interest.

          • Sir since i didnt submit my pan card details bank has deducted tax on my fd at 20% rate. But the tds is not seen on form 26 as. Kindly tell wher can i see this tds on income tax website .thank u

          • Prateek Agarwal

            Since you had not submitted pan, income tax website is not able to connect it with your account (your account runs on basis of PAN). Therefore such tds can’t be seen anywhere on the income tax website.

          • Sir, then how can i attach my tds with my pan number..thanks

          • Prateek Agarwal

            You have to take tds certificate from bank and submit it to assessing officer of your ward along with an application and pan card copy to give tds deduction.

  15. sir,
    What is to be included in time deposit?

    • Rohit Agarwal

      Time deposit includes any type of Deposit which are parked with bank for a certain time period. Such as FDR etc.

  16. which are the important TDS sections?

    • Prateek Agarwal

      TDS on salary – sec 192, TDS on interest – Sec 194A, TDS on contractor – 194C, TDS on commission – 194H, TDS on rent – 194I can be said as most important sections of TDS as payment of these nature are more common.

  17. Hello

    In form 26 for interest on FD/Savings account, section 194A, Total amount shown under “total amountpaid/credited” comprises of interest from both FD+savings interest ? or is it from FD only ?

    Thanks

    • I think it should FD + Saving Interest as TDS is required to be deduct on SB interest as well.

      • Thanks Mr Rohit for your help. I was cross checking from form 26 A and from my bank statements, the amount written in form26 did not match with the sum i obtained from bank statements. I think its only FD.

        Thanks for your reply.

        Bineet

        • Rohit Agarwal

          Hello Bineet,

          Yes, I reviewed 194A again and it is not applicable on SB Bank Interest. So the interest comprises other than saving bank interest. Thanks for replying.

      • bhai yeah bhi galat hai amend it

  18. Hi,

    If the interest in a financial year is more than 10000/-, the TDS will be deducted based on the amount which is more than 10000 or on the entire interest amount?

    For example, if the interest to be paid in FY is 15000/-, the TDS should be on 5000/- or on 15000/-.

    Thanks in advance,
    RSS.

  19. Whether TDS will be deducted by the railway authorities on interest earned on compensation awarded by railway claims tribunal where aggregate interest of several years to be credited in any financial exceeds rupees fifty thousand. Plz advise

  20. Sir,

    Whether Tax on Interest earned on Fixed Deposits in Banks be calculated on projected basis and deducted as and when paid or whether the TDS has to be done only on reaching Rs.10000/-.

    Please clarifiy and oblige.

    • Prateek Agarwal

      It is specifically mentioned in income tax act that tax is to be deducted if the interest paid or likely to be paid in financial year exceeds rs. 10,000.

      • Sir,
        In that case, what if depositor withdraws his FD prematurely after TDS already deducted for 2 quarters or 3 quarters….

        • Prateek Agarwal

          Hi,
          TDS is to be deducted if the amount is likely to be more than the limits specified. This is applicable for all TDS sections.
          But a case may happen when contract ended before reaching rs. 75,000, lessee vacant the property before reaching rent of rs. 1,80,000 or person withdraws amount prematurely before reaching interest rs. 10,000(as you have said). But in TDS there is no provision of reversal of amount.
          The amount of TDS paid can be claimed by filing Income tax return(ITR). There is no other alternative.

  21. While submission of ITR , below message has been displayed on my screen
    ” the amount of salary disclosed in income details/BTI is less than 90% of salary reported in TDS1″
    Kindly guide in this regards, so can enable to file my ITR for F.Y. 2014-15.

  22. whille e filling IT return for AY 2015-16 TDS under section 194A is to be claimed by me. when I e-file the return TDS details aumatically reflects in the form, but it asks about the year in witch the TDS was paid. if i choose 2015 it does not accept the year as it says that year should not be ahead of 2014.
    now the tds was deposited in both 2014 and in 2015. if i choose 2014 it wont be appropriate. how can i claim my entire TDS deducted under 194A

  23. TDS on Interest other than Interest on Securities – Sec 194A U.C Date : 04 Apr 2015 Persons liable to deduct TDS Any person (other than individual or HUF who is not liable to audit under section 44AB in the preceding year) who is responsible for paying

    TDS on Interest other than Interest on Securities – Sec 194A
    U.C Date : 04 Apr 2015

    Persons liable to deduct TDS

    Any person (other than individual or HUF who is not liable to audit under section 44AB in the preceding year) who is responsible for paying to a resident any interest other than interest on securities is liable to deduct TDS under this section.

    Time of ded

  24. I am in share trading business. I have and sold shares from time to time and the aggregate value of all purchases is ~94 lacs and the purchase value is ~136 lacs. The net income is less than 4 lacs after interest on borrowed funds. Am I covered by section 44AB (presumptive tax). Do I require a tax audit if I wish to file return for an income lower than 8%. What will be the scenario with respect to deduction of tax on interest? An urgent help will be highly appreciated.

  25. In Form 26AS, I have some intererst income from ICICI Bank on which TDS has been deducted at 10%. This income does not reflect in Form 16. Do i have to show interest income in ITR. If interest income is shown in ITR, will I have to pay tax as I am in a higher slab than 10%? Please help.

    • Prateek Agarwal

      You have to show every income in your ITR whether reflecting in form 16 or not. Form 16 is for TDS purposes and may not reflect all incomes and deductions of the assessee.
      You have to pay income tax if total tax payable less TDS is positive.
      You can calculate your tax payable at Income Tax Calculator

    • CA Santosh Madanlalji Malu

      If TDS is reflected Form 26AS then you can claim credit of tax deducted by Bank u r ITR by also showing respective income. However, you can ask bank to provide form 16A for interest income and TDS made thereon for your record.

  26. I filed my ITR1 in July 2015 based on form 16 from the office and already received acknowledgement from CPC bangalore. Yesterday I saw form 26AS in which xyz firm has deposited TDS under section 194A on 20th August 2015. It may be interest of some money on which TDS is deposited. Should i file this to Income tax office? Which ITR form I should use for this? Is this income from other sources? please resolve

    • Prateek Agarwal

      Is this interest really your income or it is coming by mistake?
      If this is actually your income then you should revise ITR-1 (salaried persons has interest income can file ITR-1) and claim such TDS amount. This income is income from other sources.
      If this is a mistake then you can ignore it. No further action is required.

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