In this part of the TDS series, we’ll learn in-depth about
As we all know that “Interest” or simply “Byaaz” is a very wide term, it can include anything like interest paid on loan from friend/ relative or interest paid by the bank on fixed deposits, interest on debentures. Section 194A, specifically excludes “interest on securities”. This means, any interest in security (issued by the government) and interest on debentures/securities (issued by the company a corporation or local authority). So, let’s dive in and understand the provisions related to Section 194A.
TDS is to be deducted at 10% on the amount of interest credited under section 194A. It is deducted either at the time of payment(via cash, cheque, draft etc) or credit whichever is earlier.
The person (company, firm, AOP/BOI etc) who is paying the interest amount (i.e. payer) is responsible to make the deduction of tax before releasing the payment. However, an individual or HUF is not required to deduct TDS(but will be required to deduct tax if they are liable to audit u/s 44AB).
There are special situations where TDS u/s 194A is not required to be made. Some relevant ones are enlisted as follows:
All of us loves “dividends”. Many of us, our friends, relatives etc buy shares of big companies with the aim to earn good returns in the form of share price hikes as well as dividends. The dividend is simply an equity (and preference) shareholders profit share in the company and section 194 calls for the deduction of tax on such dividend income given to shareholders.
A principal officer of a company, which is in the process of declaring dividends (equity or preference or both) in India, is required to deduct tax on dividend covered in the sub-clause (a) or (b) or (c) or (d) or (e) of clause 22 of section 2. But from 1.4.2003, this provision of TDS will only be applicable on dividend as per section 2(22)(e) as dividends covered u/s 2(22)(a) or (b) or (c) or (d) are exempt in the hands of the shareholders.
The rate under this section is 10%. TDS will be deducted at, time of payment(via cash, cheque, draft etc) or credit, whichever is earlier.
No tax deduction will be made u/s 194 in case of shareholder (who is an individual), when:
Dividend includes any distribution by a company of accumulated profits, whether capitalized or not if such distribution entails the release by the company to its shareholders of all or any part of the assets of the company.
Dividend includes any distribution made to the shareholders of a company on its liquidation, to the extent to which such distribution is attributable to the accumulated profits of the company immediately before its liquidation, whether capitalized or not.
Dividend includes any distribution to its shareholders by a company on the reduction of its capital to the extent to which the company possesses accumulated profits, whether capitalized or not.
Dividend Includes- -Any payment by a company not being a company in which public are substantially interested -of any sum by way of loan or advance to be-
||Deemed as the dividend in the hands of the shareholder|
||Deemed as the dividend in the hands of concern|
||Deemed as Dividend in the hands of the shareholders|
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