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Tds

Piyush Shah (Student) (48 Points)

21 April 2014

Section 194A states that tax need not be deducted at source if the interest arises on deposits OTHER than term deposits. For this purpose, term deposit includes recurring deposit right? and tds will be deducted?

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9 Replies

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 21 April 2014

Hi piyush.. Yup, term deposits include recurring deposits.. If interest amount exceed Rs 10k on recurring deposits, TDS has to be deducted by banks.. Exemption is available to saving accounts, since no TDS is deducted from saving account interest

Piyush Shah (Student) (48 Points)
Replied 21 April 2014

Thanks for the answer but I posted the same question in the experts column and an expert Mr. Nikhil Kaushik replied in contrary to your answer. :/ I'm totally confused now. I posted this question because in the book from which I'm studying, it's said that recurring deposits are NOT term deposits but my handwritten note is there by the side saying that, it is. The note must've been dictated by my teacher. So still I'm confused.

Rahul jain (LEARNING & TEACHING) (435 Points)
Replied 22 April 2014

agree with yogesh......

DHRUV CHHAJER (Practicing CA) (24 Points)
Replied 22 April 2014

agree with yogesh

Deepak Gupta (CA Student) (15922 Points)
Replied 22 April 2014

TDS u/s 194A is not applicable to interest on deposits with a banking company other than time deposits.
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As per sec. 194A(3)(vii)
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The provisions of sec. 194A shall not apply to, “such income credited or paid in respect of deposits (other than time deposits made on or after the 1st day of July, 1995) with a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution referred to in section 51 of that Act)”
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and as per Explanation 1 given at the end of sub-section (3)
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"time deposits" means deposits (excluding recurring deposits) repayable on the expiry of fixed periods.

srikanth (CA Practice ) (26 Points)
Replied 22 April 2014

i agree with deepak

Yogesh Shah (Managing Corporate Finance) (1051 Points)
Replied 22 April 2014

Hi guys.. Question asked by piyush contains two issues viz. First, whether recurring deposit is term deposit & second, whether TDS is applicable on it - -- First of all, it is VERY clear that recurring deposit is term deposit. It's kept with a bank for predetermined term and it is totally different from saving deposit - - - whether TDS is applicable on that or not is a debatable issue since it is mentioned in guidelines of deposit.. Many banks don't deduct TDS on that but I hv seen some Cooperative banks deduct it.. So, if we apply conservative view, TDS has to be there