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Section 193 of Income Tax Act

Last Update Date : April 29, 2019
Estimated Read Time: 5 min

section 193

Almost every type of income earned is liable to tax by the person responsible for deducting it, such as employer or bank. TDS needs to be deposited with the government for the income earned from interest, including interest income from securities, as per section 193 of the Income Tax Act. This guide explains section 193 in detail.

What is Section 193?

Section 193 deals with the tax deductions on the interest earned from securities and also, for tax deducted at source (TDS) by those required to deduct tax, such as an employer or bank. Unlike non-residents, if a resident earns income from securities, then tax is deducted at source at the rate of 10% when payment is made or account is credited.

When Tax Shall be Deducted?

When there is a payment or credit to a resident account, tax should be deducted.

Tax Exemptions u/s193

Tax does not get deducted in the below situations:

  1. For a National Defence bond held by a resident, interest is payable at 4.25%
  2. On interest paid at 4.25% on national defence loans from 1968 or 1972
  3. Interest payable on National Defence Loan.
  4. Interest payable on 7-year National Savings Certificate.
  5. Effective from 1/07/2012, for resident individual, resident or HUF where interest that is payable on debentures issued by a company in which the public are greatly interested, provided these conditions are met:
    1. amount of interest does exceed Rs. 5000; and
    2. Payment of such interest is paid by the company by an account payee cheque.
  6. Any interest due on any security of the Central Government or State Government, other than 8% Savings (taxable) Bonds, 2003, provided the interest does not exceed Rs. 10,000 for the financial year.
  7. Interest payable on certain notified debentures issued by any institution or authority, or any public-sector company, or any co-operative society (including co-operative land mortgage bank or co-operative land development bank).
  8. Any interest payable to LIC/GIC/4 companies formed under General Insurance Business Act/any other insurer in respect of any securities owned by it or in which it has valuable interest.
  9. From 1st June 2008, any interest payable on any security issued by a company, where such security is in dematerialised form and is listed on a recognized stock exchange in India in harmony with the Securities Contracts (Regulation) Act, 1956 and the rules made there under.
  10. Interest payable on 6.5% Gold Bonds, 1977 or 7% Gold Bonds, 1980 held by a resident individual on condition that total nominal value of such bonds does not exceed Rs. 10,000 at any time during the period to which the interest relates.
  11. No tax shall be deducted if the payee (not being a company or a firm) provides Form No. 15G/15H.
  12. When the payee has obtained a certificate from the Assessing Officer for no deduction or less deduction of tax.

For no deduction or to lower the rate of deduction of tax at source, the payee can approach the Assessing Officer(AO) and make an application in Form No.13 to have a certificate issued to address the specific issue.

As per the certificate received by the payee from the AO, the payer will deduct tax at the rate applicable or at a lower rate, if specified in certificate.

TDS Rates

According to Section 193, tax is to be deducted at 10% from the sum of interest. However, if the payee does not provide his Permanent Account Number (PAN), then the payer must deduct taxes at a higher rate as of following:

  • Higher than the rate specified in the relevant provision of the Income-tax Act.
  • Higher than rates in force at that time as prescribed in the Finance Act.
  • At the rate of 20%.

TDS Credited With The Government

Payer, who deduct tax from the payees must make payment of the same to the credit of the Central Government by the following due dates:

  • Tax deducted during the month of April to February should be paid to credit of the Government on or before 7 days from the end of the month in which the tax is deducted.
  • Tax deducted in the month of March should be paid to the credit of the Government on or before 30th day of April.

Rates of Interest for Delayed TDS Payment

In situations where the person responsible for deducting taxes fails to deposit the deducted amount in full or part, will be subject to simple interest at the rates below:

  • Interest on late deduction will be levied at 1% for every month or part of month on the amount of such tax from the date it was deductible till t is deducted.
  • Interest on delay in payment after deduction will be levied at 1.5% for every month or part of the month on the amount of such tax from the date it was deducted till it is paid in full.

Issuing TDS Certificate to Deductee

Every deductor must provide a TDS certificate to the deductee in Form No. 16A (for tax deducted on payments other than salary, to learn more please refer our guide on Form 16). The certificate should be issued on quarterly basis by following dates:

QuarterDue date for Non-Government deductor
April to June15th August
July to September15th November
October to December15th February
January to March15th June

Furnishing TDS Return

As we read earlier it is must for the deductor to provide the details of TDS payments made to the government in the specified manner. These details are provided on quarterly basis, each with its corresponding due dates for filing TDS returns.

Defaults in Procedure

A deductor avoiding the belowwill be accountable to penalty/persecution:

Default in:

  1. obtaining Tax Deduction Account Number (TAN)
  2. deduction of tax
  3. payment of tax to the credit of the Government
  4. furnishing the TDS return
  5. furnishing the TDS certificate to the payee

Expenses of Business Not Accepted for Non-TDS

Any sum due to a resident, which is subjected to deduction of tax at source, attracts 30% disallowance. while calculating income chargeable to tax under the head “Profits and gains of business or profession”:

  • If tax is deductible at source but is not deducted.
  • If tax is deducted during the year, and the same is not paid on or before the due date of filing of return of income.

In other words, if tax is deducted during the year and the same is paid on or before the due date of filing the return, then the concerned expenditure will be deductible in the year in which such expenditure is incurred. However, any payment disallowed by above-mentioned provision, shall be allowed as a deduction in computing the income of the year in which such tax deducted has been paid to the Government.

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CA Shreya Oturkar
Shreya is a tax advisor at H&R Block (India) with intensive experience in SME taxation and audit. She holds an advanced post graduate qualification in accounting and is highly skilled in financial analysis and reporting. Apart from her professional achievements, Shreya is a talented artist with a flair for free-hand sketching!

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