TDS ON INTEREST PAYMENTS BY
BANKS
November, 2011
TDS ON INTEREST
INTEREST ON BANK DEPOSITS
 TDS applicable to interest on




term / fixed deposits
cumulative deposits
reinvestment deposits
variable / flexi deposits
 TDS not applicable to interest on


recurring deposits
deposits in savings bank accounts
GENERAL EXEMPTIONS
 Payments to the following persons are exempt
from TDS u/s. 196 –
 Government
 RBI
 Mutual funds
 Corporations established under central Law whose
income is exempt
TDS ON INTEREST
EXEMPTIONS FROM TDS –
 Interest
paid to banks, cooperative banks, financial
institutions established under the law, LIC, UTI,
Insurance companies
 Interest paid by a cooperative bank to its member or
another cooperative society
 interest paid on deposits by primary agricultural credit
society / primary credit society / cooperative land
mortgage bank / cooperative land development bank
 Interest paid to notified institutions/associations/bodies
 Interest paid by banks and cooperative banks in respect
of deposits other than time deposits
TDS ON INTEREST
INTEREST ON BANK DEPOSITS
 interest payable on all the deposits in the
branch standing in the name of a payee should
be aggregated even if multiple Ids were alloted
 interest payable in the case of a deposit in
joint names should be aggregated with the
interest payable to joint account holder having
higher interest income (circular No. 256)
CASES OF NON DEDUCTION / LOWER DEDUCTION
 Cases of payees other than company or firm
who furnish declarations in form No 15G / 15H
 Cases of payees covered by certificate of non
deduction or deduction at a lower rate issued
by the Income tax department u/s.197
CONDITIONS FOR VALIDITY OF
15G / 15H DECLARATIONS
 Declarations should not be accepted routinely
 Blank / incomplete declarations are invalid
 Declaration in form No. 15G not valid if the
amount paid / credited exceeds the tax exemption
limit
 Declarations valid only for the assessment year
mentioned therein
CONDITIONS FOR VALIDITY OF
15G / 15H DECLARATIONS
 Separate declarations required for each year of
deposit
 Declarations to be obtained in each year afresh
 Declarations valid only for the payment / credit
made subsequent to the date of declaration
 Declarations furnished without PAN are not valid
with effect from 1-4-2010
 Declarations to be forwarded to the jurisdictional
Commissioner of Incometax on or before 7th of
the following month
CERTIFICATES OF NON-DEDUCTION/LOWER
DEDUCTION
 Certificate valid prospectively from the date of its issue
 Valid till the end of the financial year only
 Valid to the extent of the interest payable amount
mentioned therein
Instances of payments liable to
TDS
 Payment of rent for the bank/ATM premises-194I
 Payment of car hire charges-194C
 Payment for hiring of equipment such as generator etc.,-194I
 Payment of courier charges -194C
 Payment of commission to recovery/mobilizing agents-194H
 Payment of fees for credit verification-194H
 Payment of fees for valuation of immovable properties/jewellery-
194J
Instances of payments liable to
TDS
 Payment of fees to advocates/chartered accountants-194J
 Payment of fees to MICR centres for clearance of





cheques/demand drafts-194J
Payment of AMC charges for maintenance of generator/a.c./lift
etc.-194C
Payment of AMC charges for maintenance of
computer/networking hardware/software-194J
Payment of charges for supply of manpower for data entry-194C
Payment of charges for security services-194C
Payment towards cash management service-194J