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.
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 there is a payment or credit to a resident account, tax should be deducted.
Tax does not get deducted in the below situations:
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.
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:
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:
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:
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:
|Quarter||Due date for Non-Government deductor|
|April to June||15th August|
|July to September||15th November|
|October to December||15th February|
|January to March||15th June|
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:
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”:
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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