Section 193 TDS on Interest on Securities – Rate and Provisions

Section 193 TDS on Interest on Securities – Rate and Provisions as per Income Tax Act

section 193 tds on interest on securities
section 193 tds rate

Introduction: Section 193 TDS on Interest on Securities as per Income Tax act

The Income tax act has made provision to deduct income tax at source as tds on amount paid as interest on securities. As per section 193 Tds on interest on securities of the income tax act, the person responsible for paying to a Indian resident any income by way of interest on securities shall deduct tax at source.

Rate of deduction

The TDS rate on payment of Interest on securities is 10%.  A person paying any amount as interest on securities shall deduct income tax at 10%. 

See also: TDS Rate chart for Financial Year 2018-19 click here

When to deduct Tds

The person paying any amount as interest on securities shall deduct tds at the time of credit or at the time of payment, whichever is earlier.

The interest can be paid in cash, or by issue of a cheque or draft or by any other mode.

Exclusion of following Interest incomes from TDS

The income tax act exclude certain interest incomes from the scope of tax deduction at source (tds), on following interest income tds is not require to be deduct:

National Defence Bonds or Loans

  • any interest income  on 4.25% national defence bonds, 1972 provided that such bonds are held by an individual and not being a non-resident
  • any interest income payable to an individual on 4.25% or 4.75% National Defence Loan, 1968

Gold Bonds

  •  6.5 % Gold Bonds, 1977 or 7% Gold Bonds, 1980, provided that such bonds are hold by an individual not being a non resident and the bond holder shall makes a declaration in writing before the person paying such interest and also the total nominal of such bonds did not exceed Rs 10000 at any time during the period

Government Securities

  • Interest on Securities of Central or State Government, provided that tds will require to be deduct on interest amount exceeding Rs 10000 on 8% Savings (Taxable) Bonds, 2003 or 7.75% Savings (Taxable) Bonds, 2018 at any time during the year

Interest payable to Insurance company

  • interest payable to the Life Insurance Corporation of India established under the life insurance corporation act, 1956, provided that such securities are owned by it or have full beneficial interest
  • interest payable to General Insurance Corporation of India or any of the four companies established under Section 16(1) the General Insurance Business (Nationalisation) Act, 1972, provided that such securities are owned by it or have full beneficial interest
  • any interest payable to any other insurer in respect of any securities owned by it or in which it has full beneficial interest

Other Bonds

  • interest on 7-Year National Savings Certificates (IV Issue)
  • interest income payable on debentures, issued by any institution or authority, or any public sector
    company, or any co-operative society (including a co-operative land mortgage bank or a co-operative
    land development bank), as the Central Government may, by notification in the Official Gazette,
    specify in this behalf
  • interest on national development bonds
  •  interest income payable to an Individual or a Hindu Undivided Family (HUF) and should be resident, on any
    debenture issued by a company in which the public are substantially interested provided that

    •   the aggregate amount of interest on such debentures to such Individual or a Hindu Undivided Family does not exceed Rs 5000.
      • also, such interest is paid by the company by way of an account payee cheque
  • any interest payable on any security issued by a company, where such security is in dematerialised
    form and is listed on a recognised stock exchange in India in accordance with the Securities
    Contracts (Regulation) Act, 1956

Other Provisions

where any interest payable is credited to any account whether called “Interest payable account” or “Suspense account” or by any other name, in the books of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of Income tax act shall apply accordingly

Note: For latest notifications and updates on Section 193 Tds on Interest on securities click here

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