Section 193: TDS on Interest on Securities

In this post, we will discuss on the TDS deductions under Section 193.

We will look into the following topics:

• Introduction
• Who shall deduct TDS under Section 193?
• Rate and time of TDS deduction u/s 193
• Penalty for delayed payment and delayed return filing
• Exemptions u/s 193
• Issuance of TDS certificate u/s 193

Introduction

Section 193 deals with the TDS on interest on securities. Tax is deducted under section 193 if any person pays income by interest on securities to a resident.

But not applicable if the payment of interest on securities is done to a non-resident. Payments made to non-residents are covered under the TDS but tax is deducted as per section 195.

Who shall deduct TDS under Section 193?

The person who needs to pay interest on securities to a resident need to deduct TDS under Section 193.

Rate and time of TDS deduction u/s 193

The tax rate under Section 193 is 10%. The time of deduction is earlier of, the credit of income to the account of the payee (receiver) or actual payment (in cash, cheque, draft, or other modes).
If the payee does not submit PAN, TDS is deducted at Maximum Marginal Rate. The lower TDS certificate & Nil TDS certificate under Section 197 can be issued if the conditions are satisfied.

Penalty for delayed payment and delayed return filing

Section 201(1A)

Late Deduction of TDS: If TDS is deducted but not deposited to the government then interest is levied @1.5% per month/part of a month on the TDS amount from the date TDS was deducted to when TDS was deposited.
Late Payment of TDS: If TDS is not been deducted then interest is levied @1% per month/ part of a month on the TDS amount from TDS was deducted to when TDS was deposited.

Section 234E

The penalty is Rs. 200 per day until the educator pays back the TDS to the government. The penalty amount cannot be more than the TDS amount (for which return is filed).

Example: Rick needs to file TDS return for Q2 (July – September) for Rs.2,500. The due date is 31 October but Rick filed his return on November 15th. Therefore, the penalty will be Rs.3,000. According to penalty u/s 234 E, the total TDS amount depends on Penalty or TDS amount, whichever is lower. So, the total TDS amount for which return needs to file is Rs. 2,500.

Section 271H 

Under this section, Assessing Office can levy a penalty between Rs. 10,000 to Rs.1lakh for the following:

1. If no TDS return filed before the expiry of a period of 1 year from the due date.
2. TDS, late filing fees, and interest are not deposited to the government.

Exemptions under Section 193

The following are exempted from TDS:

• A National Defence Bond held by a resident, the rate of interest for which is 4.25%.
• National Defence Loans availed during the period of 1968 or 1972, which is charged at an interest rate of 4.25%.
• Interest payable on National Defence Loan.
• Interest payable on 7-year National Savings Certificate.
• Interest payable on debentures issued by a company wherein the public is substantially interested, provided that the sum of interest is confined to Rs 5000; and the company deposits the interest courtesy an account payee cheque (applicable for resident individual, resident or HUF).
• Overdue interest on any security of the Central Government or State Government provided that the interest is not above Rs. 10,000 for a financial year (will not be applicable for 8% Savings (Taxable) Bonds, 2003).
• Interest payable on certain notified debentures issued by any institution/authority, public sector company or any co-operative society.
• Interest payable to certain companies established under the General Insurance Business Act or any other insurer.
• Interest payable on dematerialized security issued by a company provided that the security is listed on a recognized stock exchange as per the regulations of the Securities Contracts (Regulation) Act, 1956.
• Interest payable on 6.5% gold bonds, 1977 or 7% gold bonds, 1980 held by a resident individual if the total nominal value of such bonds is limited to a sum of Rs. 10,000 during the period to which the interest relates.
• Payee, who is not a company or a firm, has issued Form no 15G/15H.
• Payee is in custody of a certificate that permits no deduction or less deduction of tax.

Issuance of TDS certificate u/s 193

The issuance of the TDS certificate for the TDS under Section 193 are the same as discussed in the case of Section 194A.

Every deductor needs to produce a TDS certificate to the deductee in Form No. 16A (for tax deducted on payments other than salary).

The TDS certificate is issued quarterly on the following dates:

With that, we have come to the end of this post. Share your queries and views with us in the comment section below.