Sec. 194A: Interest other than Interest on Securities

Who is liable to deduct tax?
The person (other than an Individual or
HUF) who is responsible for paying to
a resident, any income by way of
interest other than ‘Interest on
Secutiries”,
TDS u/s 194A to be made also by
individuals & HUFs covered u/s 44AB.
Sec. 194A: Interest other than Interest on Securities

Rate of TDS : (F.Y. 2010-11)
 Resident – Non Companies:
10% [No S.C/E.C/SHEC]
 Resident – Domestic Companies
10% [No S.C/E.C/SHEC]
 In all cases – 20% - if PAN is not quoted with
effect from 01-04-2010
[No S.C/E.C/SHEC]
Sec. 194A: Interest other than Interest on Securities

When TDS is to be made ?
At the time of payment of interest in cash
or by issue of cheque or draft or by any
other mode or credit of it to any account,
whichever is earlier.
Sec. 194A: Interest other than Interest on Securities
Credit to any Account:
 Whether called “Interest payable a/c.” or
Suspense a/c. or by any other name in
the books of the Payer.

Sec. 194A: Interest other than Interest on Securities
Interest as referred to in Sec. 194A
includes payments made in respect of ;

Intercorporate deposits/loans

Public Deposits

Loans

Late payment of bills

Payment
by
consignor
to
commission agent.

Sec. 194A: Interest other than Interest on Securities

Where no tax is to be deducted at source u/s.
194A
(i) If the aggregate amount of interest during the
F.Y. does not exceed Rs.10,000/- payable by a
Banking company, Co-op.society engaged in
banking business and post office.
 (ii) If the amount of interest does not exceed
Rs.5,000/- in any other case.
Sec. 194A: Interest other than Interest on Securities

(B) In the case of the following Payees:
 (i) Banking Company or a Co-op Society
engaged in banking business
 (ii) Financial Corporation established under a
central, state or provincial Act
 (iii) LIC/UTI/ any Company or Co-op Society
carrying on Insurance business / such other
institution / association or body or their class as
notified by Central Government in the Official
Gazette.
Sec. 194A: Interest other than Interest on Securities


(iv)
Partner of a firm if the payer is firm.
(v) Member of a Co-op.society or any Coop.society where payer is a Co-op. society.
 (vi) Depositor of a notified scheme framed by
Central Government.
 Notified Schemes: Post Office R.D. A/c./ Post
office Time Deposits / Monthly income A/c. /
N.S.C. / Kisan Vikas Patras/ Indira vikas patras.
Sec. 194A: Interest other than Interest on Securities

(vii)
Depositor with a Primary agricultural
society or a primary credit society or a co-op.
land mortgage bank or a Co-operative Land
Development Bank.
 (viii)
Depositor of a banking company or of
a Co-op. society engaged in banking business
where Time deposits have been made before 17-1995.
 (ix) Any assessee where interest payable to him
under direct tax laws.
Sec. 194A: Interest other than Interest on Securities

(x) Interest credited to Non-Resident (External)
A/c.
 (xi) Interest on R.D. & Savings A/c. with banks or
Co-op. societies
 (xii)
Interest on the compensation amount
awarded by Motor Accidents claims Tribunal
where the aggregate interest paid during the F.Y.
does not exceed Rs. 50,000/-
Sec. 194A: Interest other than Interest on Securities
 (xiii)
Interest
payable
by
an
infrastructure
Capital
Company
or
Infrastructure Capital Fund or a Public
Sector Company or Scheduled Bank in
relation to a Zero Coupon Bond issued
by such company or fund or Public Sector
Company or Bank.
Sec. 194A: Interest other than Interest on Securities
 (C)Where
Self declaration under Form No.
15G is by a person other than a company
or firm . In the case of a senior citizen (65
years or more) the declaration should be
under Form No. 15H.
 Form No 15G /15H is not valid in the
absence of PAN of the declarant & TDS to
be made @ 20%.
Sec. 194A: Interest other than Interest on Securities
 (D)
No TDS by the off-shore Banking
unit from the interest paid: (i) On deposit made on or after 1-4-2005,
by a non-resident or a person not
ordinarily resident in India.
 (ii) On borrowing on or after 1-4-2005,
from a non-resident or a person not
ordinarily resident in India.
Sec. 194A: Interest other than Interest on Securities
 (E)Entities
like Charitable Trusts, Scientific
Research Associations etc., whose income
is exempt U/s. 10 on fulfillment of certain
conditions – may apply for no deduction in
Form No. 13.
Sec. 194A: Interest other than Interest on Securities
 (F) Certain
Entities whose income is
unconditionally exempt u/s. 10 (Example:
Funds or Authorities or Boards or Bodies,
by whatever name called)
 (G)
On filing of certificate U/s. 197 by
the Payee.
Sec. 194A: Interest other than Interest on Securities
 Notes:
 (i)
TDS to be made on Investment in
“Securitised Bonds”.
 (ii) TDS to be made on Bill Discounting
Charges
camouflaged
as
Finance
Charges.
 (iii)TDS U/s. 194A to be done on accrual
basis every year, irrespective of the date
of payment on maturity.
Sec. 194A: Interest other than Interest on Securities
 (iv)If
Renewal of deposit is made
retrospectively, TDS U/s.194A to be made
from the date of renewal (on the interest
payments)
 (v) No TDS U/s. 194A in respect of R.Ds.
 (vi)Deposits in Joint names – The limit of
Rs.10,000/- should be seen only w.r.t. the
First Holder.
Sec. 194A: Interest other than Interest on Securities

(vii)
TDS U/s. 194A to be made on accrual
basis annually in respect of cumulative deposits.
 (viii)
TDS U/s. 194A to be made on Interest
on RFC deposits to Resident but not ordinarily
Resident Persons, even if such income is
exempt U/s. 10 .
 (ix) Form H should be available with the
deductor before the payment or credit of interest.
Sec. 194A: Interest other than Interest on Securities
 (x) It
is the responsibility of the deductor to
forward Form 15G/15H to the CIT or CCIT
within 7 days, from the end of the month in
which it is received – Failure to do so may
attract penalty U/s. 272A(2)(f) @ Rs.100/for each day of default
Sec. 194A: Interest other than Interest on Securities
 (xi)
TDS U/s. 194A to be made on the
Gross Interest payable and not on the net
interest after mutual setoff between the
parties.
 (xii) Interest referred U/s. 194A is not only
Taxable but also any interest.
Sec. 194A: Interest other than Interest on Securities

(xiii)
False declaration in Form 15G/15H
Prosecution U/s. 277.
 (a) If the amount of tax involved is > Rs. 1 lakh,
Rigorous imprisonment for a term which shall
not be less than 6 months but which may extend
to 7 years and with fine.
 (b) In any other case, not less than 3 months /
which may extend to 3 years and with fine.
Sec. 194A: Interest other than Interest on Securities


xiv)Abetment of False return etc. U/s. 278:
(Example: Bank Manager forwarding False
Form No. 15G to the CIT) ----- Same Penalty as
in (xiii) above.
 (xv)
Trust making interest payments to
Trustees who are assessed either in Individual
capacity or representative capacity – TDS to be
made since the Trust is not entitled to go behind
the constitution and see the status of the
beneficiary.
Sec. 194A: Interest other than Interest on Securities
 (xvi)
A minor cannot file a declaration in
Form No. 15H.
 (xvii)
Form 15H submitted after the year
end (i.e 1st April) TDS should have been
deducted. The deductor violated the law
and incurred the liability by not deducting
before the year end (i.e 31st March).
Sec. 194A: Interest other than Interest on Securities

(xviii)
TDS U/s. 194A is to be made when
interest is paid in pursuance to court orders.
Similarly, TDS is to be made
on Interest
payment on awards of other Tribunals like Motor
Accidents Tribunal, Insurance Companies in
delayed payments on settlement of claims.
 (xix)
TDS U/s. 194A is to be made on
Interest Payments to Canfin Homes (which are
distinct from Banks)
Sec. 194A: Interest other than Interest on Securities
 (xx)
payer of interest not concerred with
tax liability of payee.
 (xxi) Hire purchase agreements not loan –
Not covered u/s 194A.
 (xxii) Interest paid by assessee along with
loan repaid –TDS is a must u/s 194A.