The Finance Bill 2024 proposes amendments to Section 193 of the Income-tax Act, which governs tax deductions on interest from securities. Currently, the section excludes interest on certain government securities from TDS requirements. However, the new amendment introduces tax deduction at source (TDS) for interest payments exceeding ₹10,000 on Floating Rate Savings Bonds (FRSB) 2020 and other government securities as specified by the Central Government. This adjustment aims to ensure tax compliance on higher interest payments and will be effective from October 1, 2024. The change aligns with the existing provisions that mandate TDS on interest exceeding ₹10,000 for other taxable savings bonds, thereby broadening the scope of securities subject to tax deductions.
Budget 2024: Tax Deduction at source on Floating Rate Savings (Taxable) Bonds (FRSB) 2020
Section 193 of the Act provides for deduction of tax at source on payment of any income to a resident by way of interest on securities.
2. The Government has introduced Floating Rate Savings (Taxable) Bonds (FRSB) 2020. The provisions of section 193 of the Act are proposed to be amended to allow for deduction of tax at source at the time of payment of interest exceeding ten thousand rupees on ––
3. the Floating Rate Savings Bonds (FRSB) 2020 (Taxable) and
4. any security of the Central Government or State Government, as the Central Government may, by notification in the Official Gazette, specify in this behalf.
5. The amendments will take effect from the 1st day of October, 2024.
[Clause 51]
Extract of Clause 51 of Finance Bill 2024
Clause 51 of the Bill seeks to amend section 193 of the Income-tax Act relating to interest on securities.
The said section provides for deduction of income-tax at source on interest payable on securities.
The proviso to said section excludes, inter alia, any interest payable on any security of the Central Government or a State Government from the requirement of deduction of tax at source. Further, the proviso to clause (iv) of the proviso to the said section provides that any interest payable on 8% Savings (Taxable) Bonds, 2003 or 7.75% Savings (Taxable) Bonds, 2018 shall be liable for deduction of tax at source, if the interest payable on such securities exceeds ten thousand rupees during the financial year.
It is proposed to substitute the proviso to the said clause (iv) to also provide that the interest payable on Floating Rate Savings Bonds, 2020 (Taxable) or any other security of the Central Government or the State Government as may be notified by the Central Government shall also be liable for deduction of tax, if the interest payable on such securities exceeds ten thousand rupees during the financial year.
This amendment will take effect from 1st October, 2024.
Proposed Amendment to section 193 of Income Tax Act, 1961 vide Finance Bill, 2024
In section 193 of the Income-tax Act, in the proviso, in clause (iv), for the proviso, the following proviso shall be substituted with effect from the 1st day of October, 2024, namely:––
“Provided that nothing in this clause shall apply to the interest exceeding ten thousand rupees payable during the financial year on 8 per cent. Savings (Taxable) Bonds, 2003 or 7.75 per cent. Savings (Taxable) Bonds, 2018 or Floating Rate Savings Bonds, 2020 (Taxable) or any other security of the Central Government or State Government as the Central Government may, by notification in the Official Gazette, specify in this behalf;”.
