Section 194A of the Income Tax Act deals with the provisions relating to deduction of TDS on interest (other than interest on securities). Interest like interest paid on an unsecured loan, interest paid by banks on fixed deposits, interest paid on loans and advances, etc. are covered under the provisions of section 194A.

The present article helps to understand the provisions attached with Section 194A of the Income Tax Act, 1961.

Basic Provisions of Section 194A –

Essential features of section 194A are summarized hereunder –

  • Any person, other than individual or HUF, who is paying interest (other than interest on securities) to a resident is required to deduct TDS.
  • If the individual or HUF are liable to get their accounts audited as per section 44AB [clause (a) or (b)], then, such individual or HUF would be required to deduct TDS on payment of interest (other than interest on securities) to a resident as per provisions of section 194A.
  • Section 194A is applicable only in case of payment of interest to a resident i.e., the provisions of section 194A doesn’t apply to the payment of interest to a non-resident. The same is covered within the purview of section 195.

Point of time when TDS is to be deducted –

The Deductor liable to deduct TDS as per provisions of section 194A is required to deduct TDS within earlier of the following dates –

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

Rate of TDS on interest other than interest on securities –

If the provisions of section 194A of the Income Tax Act gets attracted, the Deductor is liable to deduct TDS on interest other than interest on securities @10%.

However, if the Permanent Account Number is not furnished, in that case, the Deductor would be liable to deduct TDS @20% i.e., maximum marginal rate.

The Time limit of depositing the deducted TDS –

The Deductor who has deducted TDS as per provisions of section 194A are required to deposit the same within the following due dates –

Months Due date
April to February 7th of the next month
March On or before 30th April

Threshold Exemption limit under section 194A –

TDS is not to be deducted under the following case –

Amount Category of Payer
An aggregate amount of interest doesn’t exceed INR 40,000 [INR 50,000 in case of a senior citizen] Bank
An aggregate amount of interest doesn’t exceed INR 40,000 [INR 50,000 in case of a senior citizen] Co-operative Society
An aggregate amount of interest doesn’t exceed INR 40,000 [INR 50,000 in case of a senior citizen] Post office
An aggregate amount of interest doesn’t exceed INR 5,000 In any other case

List of interest exempted under Section 194A –

Some of the important lists of interest which is exempted under section 194A are –

  • Interest paid to any bank, financial corporation, Life Insurance Corporation Unit Trust of India, any company or a co-operative society engaged in the insurance business.
  • Interest paid by a partnership firm to the partners.
  • Interest paid by co-operative society to its members.

Question –

What is Section 194A?

Section 194A covers provisions relating to deduction of TDS on interest other than interest on securities. If the provisions gets attracted, the TDS @10% is to be deducted by the Deductor.

What is 194A payment?

Section 194A payment is in the form of interest (other than interest on securities). Interest payment like interest on fixed deposit, interest on any loan or interest on recurring deposits are covered within the same.

Is TDS deducted on interest paid to bank?

No, when interest is paid to bank against the loan taken, TDS provisions are not applicable, and hence TDS is not deducted on interest paid to the bank.

Who is liable to deduct TDS under 194A?

The person who is paying interest (other than interest on securities) is liable to deduct TDS if the provisions of section 194A get attracted.

Is TDS deducted on interest to partners?

No interest paid by the partnership firm to partners are not covered within the purview of section 194A, and hence TDS is not required to be deducted.

Also Read-

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 193: TDS on Interest on Securities
Section 194 – TDS on dividend
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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