Tax FAQ

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Rate of TDS on Interest Income under section 194A of the Income Tax Act

NATURE OF PAYMENT

Interest other than Interest on Securities

EXCEPTIONS: Check TDS Rates Chart For Year 2013-14


No tax shall be deducted in the following cases –

  1. Where the payee is –
  • Any banking company/ co-operative land mortgage bank.
  • Any financial corporation
  • LIC / UTI
  • Any company or society carrying on insurance business
  • Any other notified institution
  1. Where the firm pays interest to its members
  2. Where a co-operative society pays interest to its members
  3. Where a co-operative society pays interest to another society
  4. Interest on notified deposit schemes of Post office, some notified deposits schemes are –

    PO RT A/c, PO time deposit A/c PO MIS, KVP, JVP, NSC

Note: The Senior Citizen Scheme is not notified under this list. Hence TDS shall be necessary. Where a bank or a co-operative bank pays or credits interest on deposits other than time deposits.View Form 26AS TDS Deduction Status Online


Note:

  1. If a bank / co-operative bank pay interest on time- deposit, TDS shall be necessary. Here tie deposit means deposit (other than recurring deposits) repayable on expiry of fixed periods.
  2. Where a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank pays or credits interest on deposits.
  3. Where interest is paid or credited by the central Govt. under different provisions of direct taxes.
  4. Where interest is paid on compensation amount awarded by the Motor accidents claims tribunal provided the amount of interest during a financial year does not exceed Rs. 50,000/-
  5. Interest payable on Zero coupon Bonds
  6. Interest payable by a offshore Banking unit (OBU) to NOR on deposits or Borrowings
  7. In all other cases, if the total amount of interest payable during financial year does not exceed the prescribed limit, as discussed below:

If the payer is (i) a bank, (ii) a co-operative bank, (iii) post office — 10,000/-

If the payer is any other person – 5,000/-

Note: If the payer is bank / co-operative bank / housing finance company, the exemption limit of Rs. 10000 or 50000 shall be applied separately to each branch of payer.

Adjustment of excess / deficiency:

The payer can increase or reduce of amount of TDS so as to adjust previous excess / short deduction during the same year.

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4 thoughts on “Rate of TDS on Interest Income under section 194A of the Income Tax Act
  • KRITISUNDAR BHATTACHARJEE says:

    What was the rate of TDS applicable for pvt ltd company in the financial year 2012-13 & 2011-12?

  • sk sharma says:

    I had booked an apartment with a builder in 2008. Due dispute builder refunded the booking amount in Dec 2012 with an interest of 9 %. Builder deducted TDS on the interest amount at the rate of 10 %.
    Kindly advise if the interest received from the builder due refund is taxable and if so at what will be the tax rate and under what head this amount will be indicated in ITR – IV.

    • admin says:

      S K Sharma Ji, Interest Income received from builder for refund will be taxable under income tax act and rate of tax will depends on your slab Rate and it will come under category Income from Other source.

  • AMMU says:

    What is the section code for filing the tds for SCSS interest payment of Post Office Account.Default generated for our Q4 2012-13 26Q tds.How to correct the section code in RPU?Kindly give necessary instructions.