The term ‘interest on securities’ is defined under section 2(28B) of the Income Tax Act, 1961 which means interest on securities of the Central or a State Government and interest on debentures / other securities issued by or on behalf of a local authority / a company / a co-operative society established by the Central or State or Provincial Act.

Section 193 of the Income Tax Act deals with the provisions of deduction of TDS on interest on securities, and the same has been explained in the present article.

Brief of provisions of Section 193

As per provisions of Section 193, any person who is paying interest on securities to a resident is required to deduct TDS. Thus, the provisions of section 193 do not apply to the payment of interest on securities to a non-resident.

Rate of TDS on interest on Securities –

The Deductor is liable to deduct TDS @ 10%. However, if the payee fails to furnish his Permanent Account Number (PAN), then, in that case, the Deductor would be liable to deduct TDS at the maximum marginal rate.

The Time of deduction of TDS on interest on Securities

The Deductor is required to deduct TDS earlier of the following event –

  • At the time credit of income to the account of the payee; or
  • At the time of payment in cash or cheque or draft or any other mode.

The time limit for deposit of TDS on interest on Securities –

The Deductor deducting TDS on interest on Securities, as per provisions of section 193 of the Income Tax Act, is required to deposit the deducted TDS within 7 days of the next month in which the TDS is deducted. Further, the TDS deducted for the month of March is to be deposited within 30th April.

Issuance of TDS certificate –

The Deductor deducting TDS as per section 193 of the Income Tax Act is required to issue TDS certificate in Form 16A within the following due dates –

1. April to June – 15th August

2. July to September – 15th November

3. October to December – 15th February

4. January to March – 15th June

TDS return filing –

The Deductor liable to deduct tax under section 193 of the Income Tax Act is required to file quarterly return in Form 26Q within the following due dates –

1. April to June – 31st July

2. July to September – 31st October

3. October to December – 31st January

4. January to March – 31st May

List of interest to which provisions of section 193 doesn’t apply –

No TDS is to be deducted for interest payable on the following bonds / securities –

  • Interest on 7 year National Savings Certificate (IV issue).
  • Interest on the National Development Bonds.
  • Interest on 4.25% National Defence Loan, 1968 or National Defence Loan, 1972 held by an Individual.
  • Interest on 4.25% National Defence Bonds, 1972 held by a resident Individual.
  • Interest on Security of the Central Government or a State Government provided the interest amount doesn’t exceed INR 10,000.
  • Interest on 6.5% 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 debentures to a resident individual or HUF provided the aggregate amount of interest doesn’t exceed INR 5,000, and the interest is paid by cheque.
  • Interest on debentures issued by notified institution/authority/public sector company/a co-operative society.
  • Interest to the Life Insurance Corporation on the securities owned by it or in which it has a full beneficial interest.
  • Interest to the General Insurance Corporation on the securities owned by it or in which it has a full beneficial interest.
  • Interest to any other insurer on the securities owned by it or in which it has a full beneficial interest.
  • Interest on securities only if issued by a company in dematerialized form and listed on the recognized stock exchange.

Exemption limit under section 193 of income tax act

There is no exemption limit specified in case of TDS under section 193 except two following cases;

  • In the case of debentures issued by listed companies the limit is Rs. 5000 provided such amount should be given by an account payee cheque. And
  • In case of 8% saving (taxable) bonds the limit is Rs. 10, 000.

Question (FAQ) –

1. What is Section 193 of the Income Tax Act?

Section 193 of the Income Tax Act deals with the provisions of deduction of TDS on interest on securities.

2. Is TDS applicable on interest on debentures?

Yes, TDS is applicable on interest on debentures as per provisions of section 193 of the Income Tax Act.

3. What happens if TDS is not paid?

In case the TDS has been deducted but not paid, then, the Deductor would be liable to pay interest @ 1.5% per month from the date on which TDS was deducted till the date on which TDS was paid.

4. What is TDS rate on interest?

Section 193 of the Income Tax Act requires to deduct TDS on interest on securities @ 10%.

Also Read-

Particulars
TCS – Tax Collection at Source – A Complete Guide
TDS Rate Chart for Financial Year 2019-2020
Section 192 – TDS on Salary
Section 192A – TDS on Premature withdrawal from EPF
Section 194 – TDS on dividend
Section 194A: TDS on interest other than interest on securities
Section 194B and Section 194BB – TDS
Section 194C – TDS on Contractors
Section 194D – TDS on insurance commission
Section 194DA – TDS in respect of Life Insurance Policy
Section 194E – TDS on payment to Non-resident Sportsmen or Sports Association
TDS under Section 194EE and Section 194F
Section 194G TDS on Commission on Sale of Lottery Tickets
Section 194H – TDS on Commission or Brokerage
Section 194I of Income Tax Act, 1961 – TDS on Rent
Section 194IA TDS on transfer of immovable property
Section 194IB – TDS on Rent paid by Individual / HUF
Section 194LA: Payment of Compensation on acquisition of certain immovable property
TDS under Section 194LB, 194LBA, 194LBB and 194LBC
Section 194LC: TDS on income by way of interest from an Indian Company or a business trust
Section 194LD TDS on income by way of interest on certain bonds and Government Securities
Section 194J TDS on Fees for Professional or Technical Services
Section 194N – TDS on Cash Withdrawals
Section 194M: TDS on Payment of certain sum by certain Individual / HUF
Section 195 TDS on payment of any other sum to a non-resident
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6 Comments

  1. Mouli says:

    What is the position of “‘Interest on Loan'” .
    This does not fall under the Interest on secUrities .. Securities defined does it include this. or….

  2. Dr SOM MAJUMDAR, Australia says:

    TDS is not applied to REC Bond purchased under Capital Gain Tax Exemption section 54 EC of income tax act. Is this true?

    1. TG Team says:

      There is no exemption limit specified in case of TDS under section 193 except two following cases;

      In the case of debentures issued by listed companies the limit is Rs. 5000 provided such amount should be given by an account payee cheque. And
      In case of 8% saving (taxable) bonds the limit is Rs. 10, 000.

  3. Vinay Khanna says:

    A Real Estate company has taknen premises on hire.
    They correctly deduct 10% TDS onbrent being paid by them monthly.
    What is the time limit for them to file TDS return .
    eg, For Jan, Feb, mar 2019, which is the last date for them to file TDS return , and relevant section of Act

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