Clarification regarding deduction from interest on time deposits with banksOnline GST Certification Course by TaxGuru & MSME- Click here to Join
1. Please refer to Board’s Circular No. 617, dated 22-11-1991 regarding deduction of tax at source from interest other than ‘interest on securities’ under section 194A of the Income-tax Act with particular reference to the new provisions in relation to deduction of tax from interest on time deposits with banks.
2. A question has arisen as to whether the interest paid/credited by banks on time deposits from 1-4-1991 to 30-9-1991 has to be included for the purpose of deduction of tax at source after 1-10-1991. It is clarified that since the provisions relating to tax deduction at source from interest on time deposits with banks came into force w.e.f. 1-10-1991, only the interest paid or credited after this date will be liable for deduction of tax at source at the specified rate. The interest paid/credited during the period 1-4-1991 to 30-9-1991 will be reckoned only for the purposes of seeing whether the aggregate interest paid/credited during the financial year exceeds the limit of Rs. 2,500 which will determine the liability to deduct tax at source from payments made/credited after 1-10-1991.
Circular : No. 626, dated 12-2-1992.