What is Section 193?
TDS on interest on securities is deducted under section 193 of the Income Tax Act. It requires to deduct TDS on interest on securities @ 10%. Let us first understand the meaning of interest on securities. Interest on securities means the interest on:
- Any security of the Central Government or a State Government
- Debentures or other securities issued by or on behalf of a local authority or a company or a corporation [established by a Central, State or Provincial Act]
Who shall deduct TDS on interest on securities?
The person who is responsible for paying interest on securities to a resident shall deduct the tax component from the interest amount at the time of payment or credit to the account of payee/deductee/receiver whichever is earlier.
TDS mechanism covers Payments made to non-residents. However, tax in such a case is to be deducted as per section 195. Further provisions of section 193 are not applicable to the non-resident.
Rate of TDS u/s 193
The payer shall deduct tax at the rate of 10% from the sum of interest. However, if the payee does not furnish his Permanent Account Number (PAN), then the payer has to deduct tax at the higher of the following:
- Rate specified in the relevant provision of the Income-tax Act.
- The rate or rates in force, i.e., the rate prescribed in the Finance Act.
- At the rate of 20%.
Due Date to deposit TDS with Government
|Particulars||Time Limit to deposit TDS|
|If the amount is credited in the month of March||On or before 30th April|
|If the amount is credited in the month other than March||Within 7 days from the end of the month in which deduction is made.|
Penalty on Late Remittance of TDS
- Penalty u/s 201(1A) for late deduction/late payment of TDS
- Late Deduction: If TDS has not been deducted then in that case interest will be levied @1% per month or part of a month on the amount of TDS from the date on which tax was deductible to the date of actual deduction
- Late Payment: If TDS has been deducted but not deposited to the government in such case interest will be charged @1.5% per month or part of a month on the amount of TDS from the date in which TDS was deducted to the date in which TDS was deposited.
No TDS deduction u/s 193 under following cases:
The following are exempt from TDS deduction:
- A National Defence Bond held by a resident, the rate of interest for which is 4.25%.
- National Defence Loans availed during the period of 1968 or 1972, at an interest rate of 4.25%.
- Interest payable on National Defence Loan.
- Payment of Interest on 7-year National Savings Certificate.
- Interest payable on debentures issued by a company wherein the public is substantially interested, provided that the sum of interest is confined to Rs 5000; and the company deposits the interest courtesy an account payee cheque (applicable for resident individual, resident or HUF).
- Overdue interest on any security of the Central Government or State Government if the interest is not above Rs. 10,000 for a financial year [will not be applicable for 8% Savings (Taxable) Bonds, 2003].
- Payment of Interest on certain notified debentures issued by any institution/authority, public sector company or any co-operative society.
- Interest payable to certain companies established under the General Insurance Business Act or any other insurer.
- Interest payable on dematerialized security issued by a company provided that the security is listed on a recognized stock exchange as per the regulations of the Securities Contracts (Regulation) Act, 1956.
- Interest payable on 6.5% gold bonds, 1977 or 7% gold bonds, 1980 held by a resident individual if the total nominal value of such bonds is limited to a sum of Rs. 10,000 during the period to which the interest relates.
- Payee, who is not a company or a firm, has issued Form no 15G/15H.
- The payee is in the custody of a certificate that permits no deduction or less deduction of tax.
Deductors of tax shall issue a TDS certificate to the deductee in Form 16A for tax deducted at source other than salary. You can download a certificate from here. The due dates for receipt of TDS certificates are as below:
|TDS for the Quarter||Due-Date|
The Deductor liable to deduct tax under section 193 of the Income Tax Act shall file quarterly return in Form 26Q within the following due dates:
|April to June||31st July|
|July to September||31st October|
|October to December||31st January|
|January to March||31st May|
Yes, the government considers it mandatory for the deductors of tax to specify the details of TDS payments made to the government in the form of a return. In addition TDS returns must be filed on a quarterly basis.
All transactions liable for TDS will have tax deduction at a higher rate of 20% if the Permanent Account Number (PAN) of the payees is not available.
In a case where a person who is to receive interest cannot be identified at a stage at which provision for ‘interest accrued but not due’ is made. In such case there was no obligation upon the assessee to deduct tax at source. Therefore there could not be any question of levy of penalty and interest under section 201 upon the assessee.