Section 194A of Income Tax - TDS on Interest other than "Interest on Securities"

TDS ON INTEREST OTHER THAN 'INTEREST ON SECURITIES' AS PER SECTION 194A OF THE INCOME TAX

Section 194A of the Income Tax Act prescribes TDS on Interest paid which is "Interest other than Securities"

Applicable to Whom?

1. Any person (other than Individual and HUF) is required to deduct TDS when Interest (other than Interest on Securities) is paid to any resident person.

2. In the case of Individual and HUF, TDS on Interest (other than interest on securities) is required to be deducted when the turnover of Individual or HUF exceeds Rs. 1 Crore during the previous Financial year

   i.e. if the interest of Rs.6000 is paid to A during F.Yr.2021-22, then the turnover of F.Yr.2020-21 is to be considered. If the turnover exceeds Rs.1 crore during F.Yr.2020-21, then TDS is required to be deducted from Rs.6000 paid to Mr. A during F.Yr.2021-22.

   
   

   Is there a basic limit for TDS deduction?

   (a) In case of interest paid by the Banking Company, no TDS is required till the interest paid exceeds Rs.40000/-

   (b) In case of Interest paid by a Co-operative Society doing banking business, no TDS is required till the interest paid exceeds Rs.40000/-.

   (c) In the case of Interest paid by the Post Office, the limit is Rs.40000/-

   (d) In any other case, there is no TDS on interest up to Rs.5000/-.

In the above for items (a), (b) & (c), in case of payments made to Senior Citizens, the interest payment limit without deduction of tax is Rs.50000/-.

Exemption of TDS on Interest to whom?

The above provisions of TDS on Interest are not applicable in the following cases :

1.Any income credited or paid to :

(a) Any Banking company or Co-operative society engaged in the business of banking

(b) LIC

(c) UTI

(d) Any company or co-operative society carrying on insurance business.

However, TDS will be required to be deducted if the turnover of the Co-operative Society is above 50 Crores during the preceding Financial year and the interest paid is Rs.40000/- in the case of any person and 50000/- in the case of Senior Citizen.

(e) Any Finance corporation established under central or State law

2. Any interest paid by the Firm to its partners

3. Any interest credited or paid by the Co-operative Society to its members or to other Co-operative Society

4. Any interest credited on the compensation amount awarded by the Motor Accident Claims Tribunal

5. Any interest paid on the compensation amount awarded by the Motor Accident Claims Tribunal if it does not exceed Rs. 50000 in a financial year

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