Section 193 TDS on Interest on securities


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TDS on Interest on Securities
As per section 193 if any person who is paying interest on securities to resident person then it is required to deduct TDS. The summary of this section is as under:
Summary of Section 193 of the Income Tax Act
  • Deductor/ Payer: Any Person
  • Deductee/ Payee: Resident person
  • Nature of Payment: Interest on securities
  • Interest on securities means as per section 2(28B) of the Income Tax Act:
    • interest on any security of the Central Government or a State Government;
    • interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act
  • Rate of TDS:
    • If PAN is furnished, then TDS rate @ 10%
    • However, in case the PAN is not furnished, then Deductor would be liable to deduct TDS @ 20% i.e. at the maximum marginal rate.
  • Time of deduction: Deductor is required to deduct TDS within earlier of the following dates:
    • At the time of credit of such income to the account of the payee or
    • At the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode
  • No TDS is required to be deducted for interest payable on the following bonds/securities: –
    • Interest payable on 4 % National Defence Bonds, 1972, which is held by a resident individual
    • Interest payable on 4 % National Defence Loan, 1968 which is held by an individual
    • Interest payable on 4 % National Defence Loan, 1972 which is held by an individual
    • Interest payable on National Development Bonds
    • Interest payable on 7-Year NSC National Savings Certificates (IV Issue)
    • Interest payable on debentures, issued by notified institution/authority/public sector company/co-operative society (notified by Central Government)
    • Interest payable on 6 % Gold Bonds, 1977, or 7 % Gold Bonds, 1980, held by a resident individual if total nominal value of the bonds did not exceed Rs. 10,000/- at any time during the period to which the interest relates
    • Interest payable on any security of the Central Government or a State Government
      • Exception of this clause:
        1. But if interest payable during the FY exceeding Rs. 10,000/- on the following two securities then TDS is required to be deducted:
          • 8% Savings (Taxable) Bonds, 2003
          • 7.5% Savings (Taxable) Bonds, 2018
    • Interest payable on debenture to a resident individual or a HUF, issued by a company in which the public are substantially interested, if—
      • aggregate amount of such interest paid or likely to be paid does not exceed Rs. 5,000/- and
      • such interest is paid by the company by an account payee cheque
    • Interest payable to the LIC of India on any securities owned by it or in which it has full beneficial interest
    • Interest payable to the General Insurance Corporation of India on any securities owned by it or in which it has full beneficial interest
    • Interest payable to any other insurer in respect of any securities owned by it or in which it has full beneficial interest
    • 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
  • Explanation:
    • For the purposes of this section, where any income by way of interest on securities is credited to any account, whether called “Interest payable account” or “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.

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