Sec. 194A: Interest other than Interest on Securities

Sec.Sec. 194A:194A: Interest other than Interest on SecuritiesInterest other than Interest on Securities

Who is liable to deduct tax? Who is liable to deduct tax? The person (other than an Individual or The person (other than an Individual or HUF) who is responsible for paying to HUF) who is responsible for paying to a resident, any a resident, any income by way of income by way of interestinterest other than ‘Interest on other than ‘Interest on Secutiries”,Secutiries”, TDS u/s 194A to be made also by TDS u/s 194A to be made also by individuals & HUFs covered u/s 44AB.individuals & HUFs covered u/s 44AB.


Rate of TDS : (F.Y. 2010-11)Rate of TDS : (F.Y. 2010-11) Resident – Non Companies:Resident – Non Companies:

10% [No S.C/E.C/SHEC]10% [No S.C/E.C/SHEC] Resident – Domestic CompaniesResident – Domestic Companies

10% [No S.C/E.C/SHEC]10% [No S.C/E.C/SHEC] In all cases – 20% - if PAN is not quoted with In all cases – 20% - if PAN is not quoted with

effect from 01-04-2010effect from 01-04-2010 [No S.C/E.C/SHEC][No S.C/E.C/SHEC]


When TDS is to be made ?When TDS is to be made ?

At the time of At the time of paymentpayment of interest in cash of interest in cash or by issue of cheque or draft or by any or by issue of cheque or draft or by any other mode or other mode or creditcredit of it to any account, of it to any account, whichever is earlierwhichever is earlier..


Credit to any Account:Credit to any Account: Whether called “Interest payable a/c.” or Whether called “Interest payable a/c.” or

Suspense a/c. or by any other name Suspense a/c. or by any other name in in the books of the Payer.the books of the Payer.


Interest as referred to in Sec. 194A Interest as referred to in Sec. 194A includes payments made in respect of ;includes payments made in respect of ;

Intercorporate deposits/loansIntercorporate deposits/loans Public DepositsPublic Deposits LoansLoans Late payment of billsLate payment of bills Payment by consignor to Payment by consignor to

commission agent. commission agent.


Where no tax is to be deducted at source u/s. Where no tax is to be deducted at source u/s. 194A194A

(i) If the aggregate amount of interest during the (i) If the aggregate amount of interest during the F.Y. does not exceed Rs.10,000/- payable by a F.Y. does not exceed Rs.10,000/- payable by a Banking company, Co-op.society engaged in Banking company, Co-op.society engaged in banking business and post office.banking business and post office.

(ii) If the amount of interest does not exceed (ii) If the amount of interest does not exceed Rs.5,000/- in any other case.Rs.5,000/- in any other case.


(B) In the case of the following (B) In the case of the following PayeesPayees:: (i)(i) Banking Company or a Co-op Society Banking Company or a Co-op Society

engaged in banking businessengaged in banking business (ii)(ii) Financial Corporation established under a Financial Corporation established under a

central, state or provincial Actcentral, state or provincial Act (iii)(iii) LIC/UTI/ any Company or Co-op Society LIC/UTI/ any Company or Co-op Society

carrying on carrying on Insurance businessInsurance business / such other / such other institution / association or body or their class as institution / association or body or their class as notified by Central Government in the Official notified by Central Government in the Official Gazette.Gazette.


(iv) (iv) Partner of a firm if the payer is firm.Partner of a firm if the payer is firm. (v)(v) Member of a Co-op.society or any Co-Member of a Co-op.society or any Co-

op.society where payer is a Co-op. society.op.society where payer is a Co-op. society. (vi)(vi) Depositor of a notified scheme framed by Depositor of a notified scheme framed by

Central Government.Central Government. Notified Schemes:Notified Schemes: Post Office R.D. A/c./ Post Office R.D. A/c./

Post office Time Deposits / Monthly income Post office Time Deposits / Monthly income A/c. / N.S.C. / Kisan Vikas Patras/ Indira vikas A/c. / N.S.C. / Kisan Vikas Patras/ Indira vikas patras.patras.


(vii)(vii) Depositor with a Primary agricultural Depositor with a Primary agricultural society or a primary credit society or a co-op. society or a primary credit society or a co-op. land mortgage bank or a Co-operative Land land mortgage bank or a Co-operative Land Development Bank.Development Bank.

(viii)(viii) Depositor of a banking company or of a Depositor of a banking company or of a Co-op. society engaged in banking business Co-op. society engaged in banking business where Time deposits have been made before 1-where Time deposits have been made before 1-7-1995.7-1995.

(ix)(ix) Any assessee where interest payable to Any assessee where interest payable to him under direct tax laws.him under direct tax laws.


(x)(x) Interest credited to Non-Resident Interest credited to Non-Resident (External) A/c. (External) A/c.

(xi)(xi) Interest on R.D. & Savings A/c. with banks Interest on R.D. & Savings A/c. with banks or Co-op. societiesor Co-op. societies

(xii)(xii) Interest on the compensation amount Interest on the compensation amount awarded by awarded by Motor Accidents claims TribunalMotor Accidents claims Tribunal where the aggregate interest paid during the where the aggregate interest paid during the F.Y. does not exceed Rs. 50,000/-F.Y. does not exceed Rs. 50,000/-


(xiii)(xiii) Interest payable by an infrastructure Interest payable by an infrastructure Capital Company or Infrastructure Capital Capital Company or Infrastructure Capital Fund or a Public Sector Company or Fund or a Public Sector Company or Scheduled Bank Scheduled Bank in relation to a Zero in relation to a Zero Coupon BondCoupon Bond issued by such company issued by such company or fund or Public Sector Company or or fund or Public Sector Company or Bank.Bank.


(C)(C) Where Self declaration under Form Where Self declaration under Form No. 15G is by a person other than a No. 15G is by a person other than a company or firm . In the case of a senior company or firm . In the case of a senior citizen (65 years or more) the declaration citizen (65 years or more) the declaration should be under Form No. 15H.should be under Form No. 15H.

Form No 15G /15H is not valid in the Form No 15G /15H is not valid in the absence of PAN of the declarant & TDS to absence of PAN of the declarant & TDS to be made @ 20%.be made @ 20%.


(D) (D) No TDS by the off-shore Banking unit No TDS by the off-shore Banking unit from the interest paid:-from the interest paid:-

(i) On deposit made on or after 1-4-2005, (i) On deposit made on or after 1-4-2005, by a non-resident or a person not by a non-resident or a person not ordinarily resident in India.ordinarily resident in India.

(ii) On borrowing on or after 1-4-2005, (ii) On borrowing on or after 1-4-2005, from a non-resident or a person not from a non-resident or a person not ordinarily resident in India.ordinarily resident in India.


(E)(E) Entities like Charitable Trusts, Entities like Charitable Trusts, Scientific Research Associations etc., Scientific Research Associations etc., whose income is exempt U/s. 10 on whose income is exempt U/s. 10 on fulfillment of certain conditions – may fulfillment of certain conditions – may apply for apply for no deductionno deduction in Form No. 13. in Form No. 13.


(F)(F) Certain Entities whose income is Certain Entities whose income is unconditionally exempt u/s. 10 (Example: unconditionally exempt u/s. 10 (Example: Funds or Authorities or Boards or Bodies, Funds or Authorities or Boards or Bodies, by whatever name called)by whatever name called)

(G)(G) On filing of certificate U/s. 197 by the On filing of certificate U/s. 197 by the Payee.Payee.


Notes:Notes: (i)(i) TDS to be made on TDS to be made on Investment inInvestment in

“Securitised Bonds”.“Securitised Bonds”. (ii)(ii) TDS to be made on TDS to be made on Bill Discounting Bill Discounting

ChargesCharges camouflaged as Finance camouflaged as Finance Charges.Charges.

(iii)(iii) TDS U/s. 194A to be done TDS U/s. 194A to be done on accrual on accrual basisbasis every year, irrespective of the date every year, irrespective of the date of payment on maturity.of payment on maturity.


(iv)(iv) If Renewal of deposit is made If Renewal of deposit is made retrospectively, TDS U/s.194A to be made retrospectively, TDS U/s.194A to be made from the datefrom the date of renewalof renewal (on the interest (on the interest payments)payments)

(v)(v) No TDS U/s. 194A in respect of No TDS U/s. 194A in respect of R.Ds.R.Ds.

(vi)(vi) Deposits in Joint names – The limit of Deposits in Joint names – The limit of Rs.10,000/- should be seen only w.r.t. the Rs.10,000/- should be seen only w.r.t. the First HolderFirst Holder..


(vii)(vii) TDS U/s. 194A to be made TDS U/s. 194A to be made on accrual on accrual basis basis annually in respect of cumulative deposits.annually in respect of cumulative deposits.

(viii)(viii) TDS U/s. 194A to be made on Interest on TDS U/s. 194A to be made on Interest on RFC deposits to Resident but not ordinarily RFC deposits to Resident but not ordinarily Resident Persons, even if such income is Resident Persons, even if such income is exempt U/s. 10 .exempt U/s. 10 .

(ix)(ix) Form H should be available with the Form H should be available with the deductor before the payment or credit of deductor before the payment or credit of interest.interest.


(x)(x) It is the responsibility of the deductor It is the responsibility of the deductor to forward Form 15G/15H to the CIT or to forward Form 15G/15H to the CIT or CCIT within 7 days, from the end of the CCIT within 7 days, from the end of the month in which it is received – Failure to month in which it is received – Failure to do so may attract penalty U/s. 272A(2)(f) do so may attract penalty U/s. 272A(2)(f) @ Rs.100/- for each day of default @ Rs.100/- for each day of default


(xi) TDS U/s. 194A to be made on the (xi) TDS U/s. 194A to be made on the Gross Interest payableGross Interest payable and not on the net and not on the net interest after mutual setoff between the interest after mutual setoff between the parties.parties.

(xii) Interest referred U/s. 194A is not only (xii) Interest referred U/s. 194A is not only Taxable but also any interest.Taxable but also any interest.


(xiii)(xiii) False declaration in Form 15G/15H False declaration in Form 15G/15H Prosecution U/s. 277.Prosecution U/s. 277.

(a) If the amount of tax involved is > Rs. 1 lakh, (a) If the amount of tax involved is > Rs. 1 lakh, Rigorous imprisonment for a term which shall Rigorous imprisonment for a term which shall not be less than not be less than 6 months6 months but which may but which may extendextend to to 7 years7 years and and with fine.with fine.

(b) In any other case, not less than 3 months / (b) In any other case, not less than 3 months / which may extend to which may extend to 3 years and with fine.3 years and with fine.


xiv)xiv) Abetment of False return etc. U/s. 278:Abetment of False return etc. U/s. 278: (Example: Bank Manager forwarding False (Example: Bank Manager forwarding False

Form No. 15G to the CIT) ----- Same Penalty as Form No. 15G to the CIT) ----- Same Penalty as in (xiii) above.in (xiii) above.

(xv)(xv) Trust making interest payments to Trust making interest payments to Trustees who are assessed either in Individual Trustees who are assessed either in Individual capacity or representative capacity – TDS to be capacity or representative capacity – TDS to be made since the Trust is not entitled to go behind made since the Trust is not entitled to go behind the constitution and see the status of the the constitution and see the status of the beneficiary. beneficiary.


(xvi)(xvi) A minor cannot file a declaration in A minor cannot file a declaration in Form No. 15H.Form No. 15H.

(xvii)(xvii) Form 15H submitted after the year Form 15H submitted after the year end (i.e 1st April) TDS should have been end (i.e 1st April) TDS should have been deducted. The deductor violated the law deducted. The deductor violated the law and incurred the liability by not deducting and incurred the liability by not deducting before the year end (i.e 31st March).before the year end (i.e 31st March).


(xviii)(xviii) TDS U/s. 194A is to be made when TDS U/s. 194A is to be made when interest is paid in pursuance to court orders. interest is paid in pursuance to court orders. Similarly, TDS is to be made on Interest Similarly, TDS is to be made on Interest payment on awards of other Tribunals like Motor payment on awards of other Tribunals like Motor Accidents Tribunal, Insurance Companies in Accidents Tribunal, Insurance Companies in delayed payments on settlement of claims.delayed payments on settlement of claims.

(xix)(xix) TDS U/s. 194A is to be made on Interest TDS U/s. 194A is to be made on Interest Payments to Payments to Canfin HomesCanfin Homes (which are distinct (which are distinct from Banks)from Banks)


(xx) payer of interest not concerred with (xx) payer of interest not concerred with tax liability of payee.tax liability of payee.

(xxi) Hire purchase agreements not loan – (xxi) Hire purchase agreements not loan – Not covered u/s 194A.Not covered u/s 194A.

(xxii) Interest paid by assessee along with (xxii) Interest paid by assessee along with loan repaid –TDS is a must u/s 194A.loan repaid –TDS is a must u/s 194A.

Documents

Sec. 194A: Interest other than Interest on Securities