Tax Deducted at Source (TDS) from Interest on Securities (Section 193)

 

1.

Who shall deduct tax at source?

2.

When tax shall be deducted?

3.

When no tax shall be deducted?

4.

Rate of TDS

5.

Payment of tax to the credit of the Government

6.

Interest for delay in payment of TDS

7.

Issuance of TDS certificate

8.

Furnishing the TDS return

9.

Default in any prescribed procedure

10.

Disallowance of expenses while computing business income due to non-deduction of tax at source under section 193

 

Section 193 deals with the provisions relating to TDS on interest on securities. Tax is to be deducted under section 193 if any person pays any income by way of interest on securities to a resident. Thus, the provisions of section 193 are not applicable in case of payment of interest on securities to a non-resident. Payments made to non-residents are also covered under TDS mechanism, however, tax in such a case is to be deducted as per section 195.

 

1.      Who shall deduct tax at source?

Every person who is responsible to pay interest on securities to a resident, is liable to

deduct tax at source under section 193.

 

2.      When tax shall be deducted?

As per section 193, tax is to be deducted at the time of payment or credit of interest (to any account by whatever name called), whichever is earlier.

 

3.      When no tax shall be deducted?

In the following cases tax is not to be deducted under section 193 :

 

1.         Any interest payable on 4.25 per cent National Defence Bonds, 1972, where the bonds are held by a resident individual.

 

2.         Any interest payable to an individual on 4.25 per cent National Defence Loan, 1968, or 4.75 per cent National Defence Loan, 1972.

 

3.         Any interest payable on National Development Bonds.

 

4.         Any interest payable on 7-year National Savings Certificate (IV Issue).

 

5.         With effect from 1-7-2012, any interest payable to a resident individual or resident HUF on any debenture issued by a company in which the public are substantially interested, if the following conditions are satisfied :

 

       the amount of interest or, as the case may be, the aggregate amount of such interest paid or likely to be paid on such debenture by the company to such individual or HUF does not exceed Rs. 5000; and

 

       such interest is paid by the company by an account payee cheque.

 

6.         Any interest payable on any security of the Central Government or State Government, other than 8 per cent Savings (Taxable) Bonds, 2003.However,no tax to be deducted from interest on 8 per cent Savings (Taxable) Bonds, 2003, if interest payable on such bonds does not exceeds Rs. 10,000 for the financial year.

 

7.         Interest payable on certain notified debentures issued by any institution or authority, or any public sector company, or any co-operative society (including co-operative land mortgage bank or a co-operative land development bank).

 

8.         Any interest payable to LIC/GIC/4 companies formed under General Insurance Business Act/any other insurer in respect of any securities owned by it or in which it has beneficial interest.

 

9.         From 1-6-2008, 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 and the rules made there under.

 

10.       Interest payable on 6.5 percent Gold Bonds, 1977 or 7 per cent Gold Bonds, 1980 held by a resident individual provided total nominal value of such bonds do not exceed Rs. 10000 at any time during the period to which the interest relates.

 

11.       No tax is to be deducted if the payee (not being a company or a firm) furnishes Form No. 15G/15H (provisions relating to form 15G/15H have already been discussed in section 194A).

 

12.       When the payee has obtained a certificate from the Assessing Officer for no deduction or lower deduction of tax.

 

The payee may approach the Assessing Officer by making an application in Form No. 13 for issuance of certificate for no deduction of tax or lower deduction of tax at source.

 

If the payee has obtained such a certificate from the Assessing Officer, then on production of such certificate to the payer will not deduct tax or will deduct tax at lower rate (as provided in the certificate issued by the Assessing Officer).

 

4.      Rate of TDS

As per section 193 read with Part II of First Schedule of Finance Act, tax is to be deducted @ 10% from the amount 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 following:

 

       At the rate specified in the relevant provision of the Income-tax Act.

 

       At the rate or rates in force, i.e., the rate prescribed in the Finance Act.

 

       At the rate of 20%.

 

5.      Payment of tax to the credit of the Government

The time limit for payment of tax to the credit of Government in respect of tax deducted at source under section 193 is same as discussed in case of section 194A.

 

Tax deducted from interest by the non-Government deductor is to be paid to the credit of the Central Government by the following due dates:

 

       Tax deducted during the month of April to February should be paid to the credit of the Government on or before 7 days from the end of the month in which the tax is deducted.

 

       Tax deducted during the month of March should be paid to the credit of the

Government on or before 30th day of April.

 

Illustration

Essem Traders, a partnership firm has taken a loan from Mr. Kaushal residing in Agra (friend of one of its partner). It is paying interest on monthly basis. Monthly interest amounted to Rs. 2,000 and is paid on the last day of each month. The firm deducts tax @ 10% from the monthly interest and pays the net interest to Mr. Kaushal. The tax deducted by the firm is deposited to the credit of Government by the following dates :

 

Month

Date of deposit with the

Government

Tax deducted during the month of April 2016

3/05/2016

Tax deducted during the month of May 2016

07/06/2016

Tax deducted during the month of June 2016

18/07/2016

Tax deducted during the month of July 2016

02/08/2016

Tax deducted during the month of August 2016

04/09/2016

Tax deducted during the month of September 2016

09/10/2016

Tax deducted during the month of October 2016

06/11/2016

Tax deducted during the month of November 2016

11/12/2016

Tax deducted during the month of December 2016

02/01/2017

Tax deducted during the month of January 2017

05/02/2017

Tax deducted during the month of February 2017

05/03/2017

Tax deducted during the month of March 2017

25/04/2017

 

Had the firm paid the tax to the credit of the Government within the prescribed time?

**

In respect of non-Government deductor, tax deducted during the month of April to February should be paid to the credit of the Government on or before 7 days from the end of the month in which the deduction is made and tax deducted during the month of March should be paid to the credit of the Government on or before 30th day of April. Thus, the due dates for payment of tax to the credit of the Government and the comparison of the due date with actual date of payment will be as per table given below:

 

TDS for the Month

Of

Due date of deposit

with Government

Date of deposit with

Government

Whether deposited

within the due

date?

April,2016

07/05/2016

03/05/2016

Yes

May, 2016

07/06/2016

07/06/2016

Yes

June, 2016

07/07/2016

18/07/2016

No

July, 2016

07/08/2016

02/08/2016

Yes

August, 2016

07/09/2016

04/09/2016

Yes

September, 2016

07/10/2016

09/10/2016

No

October, 2016

07/11/2016

06/11/2016

Yes

November, 2016

07/12/2016

11/12/2016

No

December, 2016

07/01/2017

02/01/2017

Yes

January, 2017

07/02/2017

05/02/2017

Yes

February, 2017

07/03/2017

05/03/2017

Yes

March, 2017

30/04/2017

25/04/2017

Yes

 

6.      Interest for delay in payment of TDS

Provisions relating to interest for delay in payment of TDS in respect of tax deducted at source under section 193 are same as discussed in case of section 194A.

 

As per section 201, if any person who is liable to deduct tax at source does not deduct tax at source, or after so deducting fails to pay the whole or any part of the tax to the credit of the Government, then such person shall be liable to pay simple interest at following rates:

 

       Interest shall be levied @ 1% for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted. Interest shall be levied @ 1.5% for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid to the credit of the Government.

 

In other words, interest will be levied @ 1% for delay in deduction and @ 1.5% for delay in payment after deduction.

 

7.      Issuance of TDS certificate

The provisions relating to issuance of TDS certificate in respect of tax deducted at source under section 193 are same as discussed in case of section 194A.

 

Every deductor has to furnish a TDS certificate to the deductee in Form No. 16A (for tax deducted on payments other than salary). The certificate should be issued on quarterly basis by following dates:

 

Quarter

Due date for Non-Government Deductor

April to June

15 th August

July to September

15th. November

October to December

15th. February

January to March

15th. July

 

The certificate should be downloaded from http://contents.tdscpc.gov.in

 

8.      Furnishing the TDS return

The provisions relating to furnishing of TDS return in case of tax deducted at source under section 193 are same as discussed in case of section 194A.

 

Every deductor who has deducted tax at source has to furnish the details of tax deducted by him to the Government. These details are to be furnished to the Government in the prescribed form. These details are to be furnished on quarterly basis. In other words, every deductor has to furnish the details of tax deducted by him by filing quarterly TDS return in the prescribed form. The due dates for filing the quarterly TDS return by a non-Government deductor are as per table given below :

 

Quarter

Due date of filing of TDS return

April to June

31 st. July

July to September

31st. October

October to December

31st. January

January to March

31st. May

 

9.      Default in any prescribed procedure

The provisions relating to various defaults are same as discussed in case of section 194A.

 

The deductor will be liable to penalty/persecution in respect of following defaults:

 

1.         Default in obtaining Tax Deduction Account Number (*)

 

2.         Default in deduction of tax

 

3.         Default in payment of tax to the credit of the Government

 

4.         Default in furnishing the TDS return

 

5.         Default in furnishing the TDS certificate to the payee

 

(*) As per section 203A(1), every person liable to deduct tax at source has to obtain Tax Deduction Account Number (TAN), except person liable to deduct tax under section 194IA i.e. TDS on purchase of land/building and such person, as may be notified by the Central Government in this behalf.

 

10.    Disallowance of expenses while computing business income due to non-deduction of tax at source under section 193

The provisions relating to disallowance are same as discussed in case of section 194A.

 

As per section 40(a)(ia), any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance while computing income chargeable to tax under the head “Profits and gains of business or profession”:

 

If tax is deductible at source but is not deducted.

 

If tax is deducted during the year, and the same is not paid on or before the due

date of filing of return of income specified under section 139(1).

 

In other words, if tax is deducted during the year and the same is paid on or before the due date of filing the return as specified in section 139(1), then the concerned expenditure will be deductible in the year in which such expenditure is incurred.

 

However, any payment disallowed by aforesaid provision, shall be allowed as a deduction in computing the income of the year in which such tax deducted has been paid to the Government.

 

Illustration

Essem Traders a partnership firm has taken a loan from Mr. Varun residing at Agra. The annual interest for the financial year 2016-17 amounted to Rs. 84,000. In March 2017, the firm deducted tax of Rs. 8,400 from the interest and paid the same to the credit of the Government on 30th July, 2017. The due date of filing the return of income is 30th. September, 2017. Can the firm claim deduction of interest of Rs. 84,000 while computing its taxable business income?

**

In this case, the tax deduction pertains to the month of March 2017, hence, it should be deposited to the credit of Government by 30th April 2017. The firm has deposited the tax to the credit of Government by 30th July, 2017, hence, there is a delay by the firm in payment of TDS amount to the credit of Government. For this delay, the firm will be liable to pay interest @ 1.5% per month or part of the month. However, this delay will not impact the deductibility of the interest while computing taxable business income.

 

As per section 40(a)(ia), any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance while computing income chargeable to tax under the head “Profits and gains of business or profession”:

 

       If tax is deductible at source but is not deducted.

 

       If tax is deducted during the year, and the same is not paid on or before the due date of filing of return of income specified under section 139(1).

 

In other words, if tax is deducted during the year and the same is paid on or before the due date of filing the return as specified in section 139(1), then the concerned expenditure will be deductible in the year in which such expenditure is incurred.

 

In this case, the due date of filing the return of income is 30th September and the firm has deposited the tax deducted by it to the credit of Government by 30th July, 2017 (i.e. before the due date of filing the return), hence, the firm can claim deduction of interest of Rs. 84,000 while computing its taxable business income.

 

Suppose in the given case, if instead of 30th July, the tax is deposited to the credit of the Government on 1st November, 2017, then the firm cannot claim deduction of interest to the tune of 30% i.e. of Rs. 25,200 while computing its taxable business income of the financial year 2016-17. In this case, it can claim deduction of Rs. 25,200 while computing its taxable business income of the financial year 2017-18.

 
Body-3
 
Get Updated ...
Tax Tutorials
E-Payment Of Direct Taxes
Filing Of Return Of Income
Interest for Delay in Filing the Return of Income [Section 234 A]
Interest for default in Payment of Advance Tax [Section 234B]
Provisions Of 'Income-Tax Law' Useful For Non-Residents
MAT (Minimum Alternate Tax)
AMT ( Alternative Minimum Tax)
Tax On Long-Term Capital Gains (LTCG)
Tax On Short-Term Capital Gains (STCG)
Exemption[ Section-54] For Capital Gains Arising On Transfer Of Residential House Property
Tax Treatment Of Gifts Received By An Individual Or HUF
Set Off And Carry Forward Of Loss Under The Income-Tax Act
Interest For Delay In Payment of TDS/TCS And For Non-Payment Of Tax Demanded
Tax Deduction/Collection Account Number (TAN)
How to apply for PAN ?
Refund Of Excess Tax Paid By The Taxpayer (Sections - 237 to 245 )
Presumptive Taxation Scheme of Section 44AD
Presumptive Taxation Scheme of Section 44ADA
Presumptive Taxation Scheme of Section 44AE
Deduction in respect of Life Insurance Premium, PPF, NSC, etc. [Section 80C]
Deduction in respect of Medical Insurance Premium [Section 80D]
Tax Deducted at Source (TDS) from Interest, other than Interest on Securities (Section-194A)
Tax Deducted at Source (TDS) from Interest on Securities (Section 193)
Late Filing Fees And Penalty For Failure To Furnish/Delay In Furnishing The TDS/TCS Statements
LIBRARY @ Tax Management
TAX & INVESTMENT GUIDE FOR "NRI"- Non-Resident Indians !
GUIDE & FAQ @ TAX
GRAPHICAL PRESENTATION @ TAX
TIPS & TRICKS @ TAX
MANAGERIAL & FINANCIAL DECISIONS @ TAX
5 GOLDEN RULES OF TAX PLANNING
FAMILY TAX PLANNING
DEDUCTIONS FROM YOUR INCOME
EXEMPTED INCOMES
HUF - FORMATION, MANAGEMENT & TAX PLANNING
COMPUTATION OF GROSS TOAL INCOME
INCOME TAX @ GLANCE
MULTIPLE KNOWLEDGEBASE ON TAX
51 TIPS ON TAX PLANNING
APPEALS UNDER INCOME TAX
ASSESSMENTS
PENALTIES UNDER IT DEPATMENTS
TAX SAVING SCHEMES
TAX READY RECKONER
TAX RATES
PROSECUTIONS UNDER INCOME TAX DEPARTMENT
TAXATION SYSTEM IN INDIA
CHARITABLE & RELIGIOUS TRUST - TAXATION
PRESCRIBED FORMS WITH with Section / Rules
KNOWLEDGE BASE !
New Topics @ Tax KnowledgeBase...
 
 

Most Popular Topics :

Corporate Tax ( Taxation in Companies)
FAQ on TDS on Salaries
FAQ on Taxable Income
FAQ on Filing of Income Tax Return
Graphical Chat Presentation of Provision of Motor Car / Other Vehicles [Rule 3(2)(A)&(B)]
'Appeals' Under Income Tax Act. 1961.
'Assessments' Under Income Tax Act. 1961.
List of Exempted Incomes (Tax-Free) Under Section-10
Income Under the Head ' Business and Professions' [Section 28 to 44]
Income Under the Head ' Capital Gain'
Income Under the Head ' House Property '[Section- 22 - 25 ]
Income Under the Head "Salary"
[Section 15-17]
Income Tax on 'Partnership Firms'
PENALTIES Under Income Tax Act. 1961.
Tax Saving Schemes for Individual -Instant Guide
New Tax Rates For FY 2017-18 & AY 2018-19
"Exempted Incomes" under Income Tax Act.
Charitable & Religious Trust :Formation, Registration, & Taxation
Hindu Undivided Family [HUF] - Formation, Management and Taxation
 

Most Popular Links :

Clubing of Income Deduction U/s 80C
Allowances Us-17(3) Exemption-Salary
Tax Amendment-2015 Taxable Income
Clubing of Income Tax Deductions
HUF Deduction HUF Investment
Gift by HUF HUF Tax Planning Tips
Tax Saving Schemes Tax Planning Tips
Refund of Tax Fringe Benefit Tax-FBT
Return Filing Assessment / Scrutiny
Notice from I.T. Dept. Incomes Types @ TDS
Exemptions-Tax Returns “Summon” U/s 131
'Black Money' @ I.Tax Big Gifts To Be Taxed
'Appeals' under I.Tax Assessment @ I.Tax
Exempted Incomes Capital Gain
Business & Professions House Property
Salaries @ I.Tax Partnership Firm
'Penalty' under I.Tax Act. Tax Ready Reckoner
Charitable Trust Useful Links @ I.Tax
 
Guide & FAQ on Tax Knowledgebase @ Taxation Income Tax @ Glance HUF - Formation, Planning & Taxation
Charitable & Religious TRUST NRI (Tax Planning,Saving,Investemnt) Budget 2017-2018 GST (FAQ, Law, Act. Rules, Schedule, Enrollment)
FAQs - Income Tax India Tax Tutorials    
________________________________________________________________________________________

Disclaimer:
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.

The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications