Bytes

Bytes - Your weekly dose of
investments, taxes, finance & more.

IT Portal 2.0
www.incometax.gov.in

IT Portal 2.0

Check out the latest videos explaining the various features of the new portal
www.incometax.gov.in
previous arrow
next arrow

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

author portrait

Hiral Vakil

TDS
TDS Sections
Last updated on June 21st, 2021

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.

However, in case of individual or HUF where the gross receipts or total sales or turnover of the previous year exceeds the monetary limits by way of business or profession provided u/s 44AB ( ie 1cr in case of business and 25 lakhs in case of profession) then both shall be responsible to deduct TDS on the payment of Interest.

As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

When to deduct TDS under section 194A?

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

Under this section if any sum payable by way of interest is credited to Interest payable account or suspense account or any other account by whatever name called the same shall be considered as deemed payment and TDS u/s 194A shall be deducted on the same.

As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%
Tip
As per section 206AB, if the aggregate of TDS and TCS for deductee is INR 50000 or more in each of these two previous years and deductee has not filed the returns of income for two previous years immediately prior to the previous year in which tax is required to be deducted then he would suffer deduction at higher of the rates of deduction as: At twice the rate specified in the relevant provision of the Act; or At twice the rate or rates in force; or At the rate of 5%

What is the threshold limit under section 194A?

TDS shall not be deducted on an amount of interest falling below Rs 10,000 where the payee is:

In any other cases the threshold limit of Rs 5,000 shall apply.

TDS Rates under section 194A

TDS Calculator
TDS (Tax Deducted at Source) is a part of Income Tax. TDS should be dedcuted by a person for specific payments made.
Explore
TDS Calculator
TDS (Tax Deducted at Source) is a part of Income Tax. TDS should be dedcuted by a person for specific payments made.
Explore

Who is exempt from deduction of TDS on Interest u/s 194A?

Section 194A shall not apply in the following cases :

When is tax deducted at NIL Rate?

Tax is deducted at 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 following conditions are satisfied:

FAQs

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

No, interest paid to NRI is not covered u/s 194A. Payments made to NRI are also covered under TDS. In case of NRI, tax is to be deducted as per section 195.

When to deposit TDS deducted u/s 194A?

Tax deducted during the month of April to February under section 194A should be deposited to the credit of the government on or before 7th of the next month. And tax deducted during the month of March should be deposited on or before 30th day of April.

Is TDS applicable on EMI of loan?

NO, TDS is not applicable on EMI loan in case interest is paid to banks.. TDS is only required to be deducted if interest on 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!

Continue the conversation on TaxQ&A

1 more reply

Participants