Hello, in this post we will discuss all about TDS Section 194A. We will cover the following:
- Introduction to Section-194A
- Payment on which TDS needs to be deducted u/s 194A
- Who must deduct tax at source?
- Deducting TDS under Section-194A
- Tax deducted at NIL rate or lower rate
- Rate of TDS interest
- Time limit for depositing TDS under section-194A
Introduction to Section 194A
Section-194A of Income Tax Act deals with the provisions regarding TDS to be deducted on interest payable like interest on fixed deposit, interest on loans and Advances. Interest on securities is not covered under this section.
Payments made to non-residents are also covered under TDS mechanism. However, tax in such a case is to be deducted as per Section 195.
Payment on which TDS needs to be deducted u/s 194A
TDS is required to be deducted under this section for payment made for interest to a resident person.
TDS is deducted u/s 194A only when payment is made to a resident, if such payment is made to non-resident then tax is to be deducted u/s 195.
Who must deduct tax at source?
Any person (not being an individual / HUF), responsible for paying to a resident any income by the way of interest other than interest on securities, is responsible to deduct TDS u/s 194A and deposit the same to the Government Treasury within the time stipulated.
Deducting TDS under Section 194A
The Payer / Deductor shall deduct TDS if the amount of such interest paid or credited or is likely to be paid or credited in a financial year, exceeds
- Rs. 40,000 where the payer is
- A banking company or any bank or a banking institution
- Co-operative society engaged in the business of banking
- Post-office (on deposit under a scheme framed and notified by Central Government).
- 5,000 in any other case
- From FY 2018-19 onwards TDS will not be deducted on interest earned upto Rs.50,000 by senior citizens. The interest amount should be earned from the following:
- Deposits with banks
- Deposits with post-office
- Recurring deposit scheme
- Fixed deposit schemes
Tax deducted at NIL rate or lower rate
Tax deduction at Nil or lower rate happens under the following scenarios:
When a declaration is submitted in form 15G / 15H u/s 197A
If a declaration is submitted u/s 197A by the recipient to the payer along with his / her PAN, then no tax is deductible if the following conditions are satisfied:
- A recipient is a person other than a company OR firm
- Tax on total income of the previous year is NIL
- Total income should not exceed the exemption limit (i.e., for AY 2016-17, Rs.2,50,000 or Rs.3,00,000 or Rs.5,00,000, as applicable). This condition is NOT applicable (NA) if the recipient is a resident senior citizen.
- Such a declaration shall be given in duplicate form 15G (15H for senior citizens). In the case of Senior Citizens Saving Scheme, 2004 (SCSS), investors can submit the declaration.
- Nominees of investors of SCSS can also produce the declaration at the time of payment after the death of the depositor.
- On submission of declaration to the bank, the bank shall not deduct tax (subject to the conditions) on payment of interest.
Rate of TDS interest
Following are the applicable rates of taxes:
|Rate of TDS||Threshold Limit||Payment by|
|10% (If PAN is furnished)||Rs.5000||Other than banks|
|20% (If PAN is not furnished)||Rs.5000||Other than banks|
|10% (If PAN is furnished)||Rs.10000||Banks|
|20% (If PAN is not furnished)||Rs.10000||Banks|
Note: No surcharge, education cess or SHEC shall be added to the above rates. Hence, the TDS will be deducted at the basic rate.
Time limit for depositing TDS under section-194A
The time limit for depositing TDS under Section 194A is listed below:
- TDS deducted during the month of April to February is to be deposited on or before the 7th of next month. Tax Deducted in the month of March is to be deposited on or before the 30th of April.
- For e.g., tax deducted on 25th April is to be deposited on or before 7th May and tax deducted on the 15th march is to be deposited on or before 30th of April.