TDS Section 194A : TDS on Interest other than Securities and Bank Deposits

TDS Section 194A : TDS on Interest other than Securities and Bank Deposits


In the intricate realm of taxation, the spotlight often falls on Section 194A of the Income Tax Act. This particular section, which centers around Tax Deducted at Source (TDS), pertains to the deduction of tax on interest payments other than interest on securities and bank deposits. While the scope of TDS application is widely understood for securities and bank deposits, the expanse of this section encompasses a broader spectrum. This blog post delves deep into the labyrinthine details of Section 194A, meticulously scrutinizing its scope, implications, and exemptions within various contextual dimensions.

What is TDS on Interest other than interest on Securities and Bank Deposits ?

Section 194A is a part of the Income Tax rules in India. It talks about how tax needs to be deducted when you pay interest to someone. This rule applies only if the person you're paying interest to lives in India. If you're paying interest to someone who lives outside of India, there are different rules for that under Section 195.

When Section 194A  Apply?

You need to deduct tax from the interest payment in these cases:
If you're a bank, co-operative society doing banking, or post office, and the interest you're paying in a year is more than ₹40,000. If you're not  than ₹5,000.
Starting from the financial year 2018-19, senior citizens don't need to have tax deducted from their interest if they earn up to ₹50,000. This applies to interest from places like banks, post offices, fixed deposits, and recurring deposit schemes.

TDS deducted at Lower Rate or Not Deducted?

> When You Fill Form 15G/15H under Section 197A

If you're not a company or firm and you give a form called 15G (or 15H if you're a senior citizen) along with your PAN number to the person paying you, they don't need to deduct tax. But this only works if:
1.You're not a company or firm.
2.You didn't have to pay any tax last year.
3.Your total money earned doesn't go above a certain limit (like ₹2,50,000 or ₹3,00,000 or ₹5,00,000, depending on your situation).
This last rule doesn't apply if you're a senior citizen. When you give this form to your bank, they won't take out tax from your money if you meet all the rules

> When You Fill Form 13 under Section 197

You can fill out form no.13 and send it to the tax office if you want to pay less or no tax. But you have to do this before the tax is taken from your money. If you don't have a PAN, you can't use this form.
Once you get this certificate, give a copy to the person giving you money. This certificate can't help with taxes you've already paid, and it's sent directly to the payer on simple paper.
If you show this certificate, the person paying you will deduct less tax (or no tax) from your money.

What is TDS Rate under section 194A?

The tax deduction rate is:
10% if the person provides their PAN number. This was temporarily reduced to 7.5% for a certain period due to COVID-19 relief.
20% if the person doesn't provide their PAN number.
No extra charges like surcharge or education cess are added to these rates.

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