Section 193: TDS on Interest on Securities

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 30^th 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 – 15^th August

2. July to September – 15^th November

3. October to December – 15^th February

4. January to March – 15^th 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 – 31^st July

2. July to September – 31^st October

3. October to December – 31^st January

4. January to March – 31^st 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%.

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