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The provisions pertaining to TDS on interest on securities are covered in Section 193. If a person sends a resident any income in the form of interest on securities, he or she must deduct tax under section 193. As a result, when paying interest on securities to a non-resident, the restrictions of section 193 do not apply.In this part we will discuss the concept of Section 193 of the tax deduction.
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:
Any person who is giving interest income on securities to a resident is required to deduct tax before releasing the interest amount.
The rate of tax u/s 193 is 10%. The time of deduction is earlier, 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.
| Particular | 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 |
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 ?
| Particular | Amount (Rs.) |
|---|---|
| Total no. of days of delay | 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, 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.
No TDS shall be deducted in the 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-
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;
[(ia) derivative;
(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;
Excess TDS is deducted when PAN provided is wrong, you can claim it by providing the correct PAN and asking your employer to file a revised TDS return.
Section 194C talks about contract services whereas 194J talks about professional services. Any services received from an advertising agency will be considered under section 194C and if services are received from individual professionals, then it will come under 194J.
Yes, interest paid to the banks are only in the negative list under section 194A.
