What is Section 193 of Income Tax Act?
As per section 2(28B) of the 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.
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. Therefore, this Section is not applicable when giving interest income on securities to a non-resident.
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 either at the time of credit of the income to the account of the payee (receiver) or at the time of actual payment, whichever happens first.
In case, the payee does not furnish PAN, TDS will be deducted at Maximum Marginal Rate.
However, a lower TDS certificate & Nil TDS certificate under section 197 can be issued under this section if conditions are satisfied.
What is the Due date for depositing TDS to the government?
| Particular |
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 |
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 on which TDS was deducted to the date on which TDS was deposited.
Section 234E :-
The penalty under this section is Rs. 200 per day till the failure continues by the deductor. However, the penalty amount cannot be more than the amount of TDS for which the return needs to be filed. Let’s say ABC required to file his TDS return for Q2 (July - September), for which the due date is 31 October, and ABC filed his return for Q2 on the 15th of November. The total amount of TDS for which the return needs to be filed is Rs. 2,500. What will be the amount of penalty u/s 234E ?
| Particular |
Amount (Rs.) |
| Total no. of days of delayed |
15 days |
| Penalty (15*200) |
3,000 |
| Amount of TDS |
2,500 |
| Penalty u/s 234 E (Penalty or TDS amount, whichever is lower) |
2,500 |
Section 271H :
Under this section, a penalty ranging from Rs. 10,000/- to Rs.1,00,000/- may be levied by the Assessing Office in case of the following situations :
- In case no TDS return is 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 are 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 where the listed companies issue debentures, no TDS shall be deducted upto Rs. 5000 (such amount upto Rs 5000 shall be given by an a/c payee cheque).
- In the case of 8% savings (taxable) bonds, for an amount up to Rs. 10, 000.
List of Interest to which provisions of Section do not apply:
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 is payable on debentures issued by the notified institution, authority, public sector company, or cooperative 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 the 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 the 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.
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