Section 193: TDS on Interest on Securities
The first thing which comes to everyone’s mind is “what is interest on securities?”. As per section 2(28B) of Income Tax Act, “interest on securities” means any interest on security (issued by the government whether state or central) and interest on debentures/securities (issued by the company a corporation or local authority established by Central, State or Provincial act).
Hence, any such interest income as received above will attract tax deduction u/s 193.
Further, the provisions of this section of TDS are as follows:
Who is required to deduct TDS u/s 193?
Any person who is giving interest income on securities to a resident is required to deduct tax before releasing the interest amount.
What is the rate & time of tax deduction u/s 193?
The rate of tax u/s 193 is 10%. The time of deduction is earlier of, the credit of income to the account of the payee (receiver) or actual payment (in cash, cheque, draft or other modes).
In case, PAN is not available or not furnished by the payee, TDS will be deducted at Maximum Marginal Rate.
However, lower TDS certificate & Nil TDS certificate under section 197 can be issued under this section if conditions satisfied.
What is the Due date of depositing TDS to the government?
||Time limit to deposit TDS
|If amount is credited in the month of March
||On or before 30th April
|If amount is credited in the month other than March
||Within 7 days from the end of the month is which deduction is made
Is there any Penalty for delayed payment and delayed return filing?
Section 201(1A) :- Late deduction/Late payment of TDS
Late Deduction : In case, TDS has been deducted but not deposited to the government then in that case interest will be levied @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.
Late Payment : In case, 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 in which TDS was deducted to the date in which TDS was deposited.
Section 234E :- Penalty under this section is Rs. 200 per day till the failure continue by the deductor. However, the amount of penalty cannot be more than the amount of TDS for which return needs to be filed.
Let’s say ABC require to file his TDS return for Q2 (July - September) for which due date is 31 October and ABC filed his return for Q2 on 15th of November. Total amount of TDS for which return needs to file is Rs. 2,500. What will be the amount of penalty u/s 234E ?
|Total no. of days of delay
|Amount of TDS
|Penalty u/s 234 E
(Penalty or TDS amount, whichever is lower)
Section 271H :
Under this section, penalty ranging from Rs. 10,000/- to Rs.1,00,000/- may be levied by Assessing Office in case of following situations :
- In case no TDS return filed before the expiry of a period of one year from the due date and
- TDS, late filing fees & interest not deposited to the government.
What is the exemptions for TDS deduction under section 193 of the Income Tax Act?
No TDS shall be deducted in the following cases:
- In case where debentures are issued by the listed companies,no TDS shall be deducted upto Rs. 5000 (such amount upto Rs 5000 shall be given by an a/c payee cheque).
- In case of 8% saving (taxable) bonds, for an amount upto Rs. 10, 000.
No requirement of TDS u/s 193 in following cases:
As per the Income Tax Act, there exist some situations which do not require any tax deduction in this section. Let’s discuss it as follows-
- Interest payable on debentures issued by the notified institution, authority, public sector company or co-operative society.
- Interest payable to LIC/ other insurers on securities owned by them or in which they have full beneficial interest.
- Interest payable on security (which is in demat form) issued by a company listed on stock exchange in India
- Interest on 7 year National Savings Certificate (IV issue).
- Interest on the National Development Bonds
- Interest on 4% National Defence Loan, 1968 or National Defence Loan, 1972 held by an Individual.
- Interest on 4% National Defence Bonds, 1972 held by a resident Individual.
- Interest to the GIC (General Insurance Corporation) on the securities owned by it or in which it has a full beneficial interest.
- Interest on 6 % Gold Bonds, 1977 or 7% Gold Bonds, 1980 held by a resident Individual only if the total nominal value of the bonds didn’t exceed INR 10,000 at any time during the period to which the interest relates.
- Interest on Security of the Central Government or a State Government
- Interest to any other insurer on the securities owned by it or in which it has a full beneficial interest.
Frequently Asked Questions
Q- What does 'securities' mean in 'interest other than on securities' in section 194A for TDS?
In the exact words of law securities means :securities include
(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;
(ib) units or any other instrument issued by any collective investment scheme to the investors in such schemes;]
[(ic) security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;]
[(id) units or any other such instrument issued to the investors under any mutual fund scheme.]
[Explanation.—For the removal of doubts, it is hereby declared that securities shall not include any unit linked insurance policy or scrips or any such instrument or unit, by whatever name called, which provides a combined benefit risk on the life of the persons and investment by such persons and issued by an insurer referred to in clause (9) of section 2 of the Insurance Act, 1938 (4 of 1938);]
[(ie) any certificate or instrument (by whatever name called), issued to an investor by any issuer being a special purpose distinct entity which possesses any debt or receivable, including mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in such debt or receivable, including mortgage debt, as the case may be;]
(ii) Government securities;
(iia) such other instruments as may be declared by the Central Government to be securities;
(iii) rights or interest in securities;
Q- How do I claim excess TDS deducted on corporate bonds? I failed to submit PAN details to my company and now am liable for 60k?
Ans: Excess TDS is deducted when PAN provided is wrong, you can claim it by providing correct OAN and asking your employer to file revised TDS return.
Q- What is the difference between TDS on advertising u/s 194C and TDS on advertising u/s 194J as per Income Tax Act, 1961?
Ans: Section 194C talks about contract services whereas 194J talks about professional services. Any services received from advertising agency will be considered under section 194C and if services are received from individual professional, then it will come under 194J.
Q- Is TDS applicable on interest paid to NBFC?
Ans: Yes, interest paid to the banks are only in negative list under section 194A.