Section 194A: TDS on Interest other than Interest on securities

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Hiral Vakil

TDS
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Last updated on February 3rd, 2023

Section 194A is only applicable to residents and it deals with interest other than interest on securities like Interest on Loans and advances, Interest on Fixed deposits, and recurring deposits.

What is Section 194A?

As per section 194A of the Income Tax Act, TDS on interest other than interest on securities is required to be deducted by any person other than an Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess, or SHEC shall be added in addition to the above rate.

However, in case of individual or HUF where the gross receipts or total sales or turnover of the previous financial year exceeds the monetary limits by way of business or profession provided u/s 44AB ( ie 1cr in case of business and 50 lakhs in case of profession) then both shall be responsible to deduct TDS on the payment of Interest.

When to deduct TDS under section 194A?

The TDS shall be deducted at the time of payment. The date of payment will be considered earlier of the following:

What is the threshold limit under section 194A?

TDS shall not be deducted on an amount of interest falling below INR 40,000 where the payee is:

Hence, in any other cases, the threshold limit of INR 5,000 shall apply.

TDS rates under Section 194A

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TDS (Tax Deducted at Source) is a part of Income Tax. TDS should be dedcuted by a person for specific payments made.
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TDS (Tax Deducted at Source) is a part of Income Tax. TDS should be dedcuted by a person for specific payments made.
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Who is exempt from deduction of TDS on Interest u/s 194A?

Section 194A of Income Tax Act shall not apply in the following cases :

When is tax deducted at NIL Rate?

Tax is deducted at the NIL rate when a declaration is submitted in form 15G/15H. When form 15G/15H is submitted by the recipient then no need to deduct TDS if the following conditions are satisfied:

TDS Return

The payer/deductor deducting TDS under section 194A shall file a Quarterly return of TDS in Form 26Q. Further, the quarterly return needs to be filed within 1 month from the end of the relevant quarter.

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FAQs

Is interest paid to NRI covered u/s 194A?

No, interest paid to NRI is not covered u/s 194A. If any payments are made to NRI then tax is to be deducted as per section 195.

Whether Interest from a savings bank account subject to TDS under section 194A?

No, Savings bank account interest is exempt from TDS rules only interest from the fixed deposit and recurring deposit is liable for tax deduction under section 194A.

Is TDS applicable on the EMI of a loan?

No, TDS is not applicable on EMI loans in case interest is paid to banks. TDS is only required to be deducted if the interest on the loan is paid to other parties.

Got Questions? Ask Away!

  1. Hey @Dia_malhotra

    As per section 194A, TDS on interest other than interest on securities is required to be deducted by any person other than Individual or HUF at the rate of 10%, when paid to a resident. No surcharge, education cess or SHEC shall be added to the above rate.

    Hope this helps!

  2. Hey @HarishMehta

    TDS u/s 194J needs to be deducted by deductor other than an individual or a HUF, @ 10% on any amount paid or payable to any which is in excess of INR 30,000 as:

    1. Fees for professional services
    2. Fees for technical services
    3. Any remuneration or fees or commission by whatever name called paid to a director ( other than salary)
    4. Royalty
    5. Any sum referred to in clause (VA) of section 28.

    Hope this helps!

  3. Hello @the_AK,

    Against gross income, you can claim business expenses that you have incurred for earning that income. So you can claim this service fee as a business expense from the gross income received by you.

    Hope this helps!

  4. Hello @Anuj_Agarwal,

    TDS will be deducted by the company when the interest is actually paid on the securities, so at that time whoever is the owner of such security shall receive the interest and can claim credit of interest.

    Hope this helps!

  5. Hi @Shivam_B

    If you have income from salary and income from insurance commission (business income), then you will be required to file ITR 3.

  6. Hi @Shivam_B

    As per the recent utilities, ITD gives you the option to select only the schedules applicable to you while filing ITR.
    Thus, you are not required to go through the entire ITR 3 form. You can also prepare and file ITR on Quicko, where you can upload form 16 and add commission income under the head “Business & Profession” and file ITR 3, without any charges as Quicko is a DIY platform helping individuals to file taxes.

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