Deduction of Tax (TDS) from Interest on Securities [Section 193]

1. Who shall deduct TDS U/s 193 ?

2. When Tax shall be Deducted U/s 193 ?

3. When No Tax shall be deducted U/s 193 ?

4. Rates of TDS U/s 193 for Financial Year 2018-19 & 2019-20 - 10%

5. Payment of TDS U/s 193 to the Credit of the Government :

6. Interest for Delay in payment of TDS U/s 193

7. Issuance of TDS certificate Under Section 193

8. Furnishing the TDS Return in case of TDS U/s 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 TDS U/s 193?

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 U/s 193 ?

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 U/s 193 ?

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

1. Interest payable to insurance companies, etc.:

Any interest payable to:—

1. Life Insurance Corporation of India;

2. General Insurance Corporation of India or any of four companies formed under it;

3. Any other insurer, in respect of any securities owned by them, or in which they have full beneficial interest.

2. Interest paid or credited by widely held company not exceeding Rs. 5,000 :

No tax is to be deducted at source if the following conditions are satisfied:

1. if debentures are issued by a widely held company;

2. such debentures may or may not be listed on a stock exchange in India;

3. interest is paid/payable to an individual or HUF who is resident in India; and

4. interest is paid by account payee cheque; and

5. the amount or the aggregate of the amounts of such interest paid or payable during the financial year does not exceed Rs. 5,000.

3. 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 thereunder.

4. Interest paid or credited on 8% Saving (Taxable) Bonds 2003 issued by the Central Government provided the interest on such bonds does not exceed Rs. 10,000.

5. Where a self declaration under Form No. 15G/15H is furnished by a particular person [Section 197A(1A), (1B) and (1C)]:

A person, other than a company or firm may furnish a declaration in writing in duplicate in new Form No. 15G to the payer to the effect that there is no tax payable on his Total Income. In this case, the payer shall not deduct any tax at source.

6. Any payment made to New Pension System Trust [Section 197A(1E)]:

No deduction of tax shall be made from any payment to any person for, or on behalf of, the New Pension System Trust referred to in section 10(44).

7. No deduction of tax from specified payment to notified institutions, association or body, etc. [Section 197A(1F)]:

No deduction of tax shall be made from such specified payment to such institution, association or body or class of institutions, associations or bodies as may be notified by the Central Government in the Official Gazette, in this behalf.

No tax shall be deducted at source from the payments of the nature specified under section 10(23DA) received by any securitisation trust.

8. Certain entities required to file return under section 139(4A) or 139(4C) [Rule 28AB]:

As per rule 28AB certain entities who are required to file there return of income under section 139(4A) or 139(4C) may apply under Form No. 13 for no deduction of tax at source provided certain conditions are satisfied.

9. Certain entities whose income is unconditionally exempt under section 10:

   In case of certain entities whose income is unconditionally exempt under section 10 and who are statutorily not required to file return under section 139 there will be no requirement for TDS since their income is in any way exempt.

4. Rates of TDS U/s 193 for Financial Year 2018-19 & 2019-20 - 10%

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.

1. No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.

2. As per section 206AA(1), if the permanent account number is not provided by the deductee, the tax shall be deducted at the higher of the following rates, namely:—

   1. at the rates specified in the relevant provisions of the Act

   2. at the rate or rates in force

   3. at the rate of 20%.

3. Further, as per section 206AA(4), no certificate under section 197 for deduction of tax at Nil rate or lower rate shall be granted unless the application made under that section contains the Permanent Account Number of the applicant.

4. Similarly, declaration under 15G/15H shall not be valid if it does not contain the permanent account number of the declarant. In case any declaration becomes invalid, the deductor shall deduct the tax @ 20%.

5. Payment of TDS U/s 193 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.

6. Interest for Delay in payment of TDS U/s 193

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 Under Section 193

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:

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

8. Furnishing the TDS Return in case of TDS U/s 193

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 :