Section 193 | TDS on Interest on Securities

Overview

Section 193 of The Income Tax Act, 1961 is an important provision which governs TDS on Interest on securities.This section covers amount of TDS to be deducted and deposited by a person who is responsible for paying to a resident indian any income by way of interest on securities. You will learn about rate of TDS, timing of when to deduct and deposit, penalties associated with TDS on interest on securities under Section 193 of Income tax act. Bizfoc is a leading tax consultant who has an expertise in TDS consultancy provided to clients within India & NRI outside India.

What is section 193 (TDS on Interest on Securities) ?

The provisions related to interest on securities are defined in section 193 of the Income Tax Act,1961. As per this section, if any person pays to an Indian resident any income in the form of interest on securities, then the said person (payer) is liable to deduct tax at source under section 193. First let's understand what is the meaning of interest on securities which is defined under Section 2(28B) of Income tax act.

Meaning of interest on securities:

Interest on securities is defined under [section 2(28B)]

1. Interest on any security of the Central Government or a State Government
2. Interest on debentures or other securities for money issued by or on behalf of a local authority or a company or a corporation established by a Central, State or Provincial Act.

Applicability of section 193 | TDS on Interest on Securities

The section 193 of income tax act covering TDS on interest on securities is applicable to any person paying interest on securities to a resident person of India.

Non-applicability of TDS under section 193:

No tax deduction is to be made from any interest payable under following circumstance:

• on National Development Bonds;
• on 7-year National Savings Certificates
• on debentures issued by any institution or authority or any public sector company or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as notified by the Central Government;
• on any security of the Central Government or a State Government

[Note – It may be noted that tax has to be deducted at source in respect of interest payable on 8% Savings (Taxable) Bonds, 2003, or 7.75% Savings (Taxable) Bonds, 2018, only if such interest payable exceeds 10,000 during the financial year.]

• On debentures issued by a public company to Individual and HUF, Provided-
  • Interest does not exceed the Threshold of Rs.5000 during the previous year, and
  • Said interest is paid by a/c payee cheque.
• on securities to LIC, GIC, subsidiaries of GIC or any other insurer, provided –
  • the securities are owned by them or
  • they have full beneficial interest in such securities.

Threshold limit and Rate of TDS on Interest on securities u/s 193

Threshold limit under section 193 covering TDS on Interest on securities is:

• Rs.5000 in case of Listed/Unlisted debentures for Individual & HUF.
• No Threshold limit for interest on other securities.

Rate of TDS given under section 193 [TDS on interest on securities ] is 10%, both in the case of domestic companies and non-corporate resident assessees.

• In a case, PAN is not furnished by the payee at the time of TDS deduction then TDS will be deducted at Maximum Marginal Rate.(Known as MMR).
• Moreover, assessee can also apply for Lower/No deduction of tax at source under section 197, if the necessary conditions are satisfied.

When to Deduct & Deposit TDS on interest on securities ?

TDS on interest on securities under section 193 @ 10% will be deducted:-

• at the time of credit of such income to the account of the payee, or
• at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier.

Time limit for deposition of TDS on Interest on securities

TDS on Interest on securities which is deducted and is required to be deposited to the central government. Time to deposit of TDS on Interest on securities is below:

Penalties and Fines u/s 193 (TDS on Interest on securities)

Here are the penalties and fines for TDS on interest on securities.

• TDS is not deducted: If a deductor has not deducted the TDS from the payments of interest on securities, then it charges interest of @1% per month till the date TDS is deducted .
• TDS is deducted but not deposited: If a deductor has deducted the TDS but has not deposited the collected tax to the government, then it charges interest @1.5% from the date when TDS is deducted till the date of deposition.
• Section 234E: Penalty @ Rs.200 will be levied subject to maximum amount of TDS

Why choose Bizfoc for TDS ?

At Bizfoc, we specialize in providing you the best accounting services in filing your TDS. Here are the reasons why we are known for our services to our clients on filing TDS:

• Assist in suggesting the right documents for TDS filing.
• Providing valuable insights on sections of TDS computations
• Prescribe forms as per the necessity
• Helps in accurate computations for TDS computations and returns
• Tailored advice and guidelines for TDS filing

In general, we assist the client to solve their queries and doubts regarding the documentation, procedures, and fees for filling out the form. Other than making your filing successful, we help you make a better decision by covering every aspect of what you actually need to get your TDS.

Conclusion

In conclusion, section 193 of The Income Tax Act,1961 covers details about TDS on Interest on securities which ensures that tax is appropriately deducted at source at time of payments of Interest on securities, which will ultimately be deposited with the government. Compliance with this section is essential for both payers and recipients to avoid penalties and interest.

FAQ’s