Section 193 of the Income Tax Act, 1961 mandates the deduction of Tax Deducted at Source (TDS) on interest earned from securities. This provision ensures tax compliance by collecting taxes at the source before interest payments are credited to the recipient.
This section primarily applies to interest on securities issued by the government, companies, and other notified securities.
| Effective from April 1, 2025 TDS u/s 193 will apply only if total interest on securities exceeds ₹10,000 per financial year. |
TDS Rates under Section 193
The TDS rates applicable under Section 193 are as follows:
- 10% for interest on securities payable to residents (subject to applicable exemptions and threshold limits).
- 20% if the recipient does not provide a valid PAN.
- No TDS is deducted if the interest is paid to specified entities exempt under the Act.
Threshold Limits for Deduction
TDS under Section 193 is deducted only if the interest amount exceeds the prescribed threshold limits:
Government Securities
- No threshold limit; TDS is deducted on all interest payments.
Debentures issued by a company (other than listed securities):
- TDS is deducted if interest exceeds ₹ 5,000 in a financial year.
Interest on securities issued by local authorities or statutory corporations:
- TDS applies as per the prescribed rates without a threshold limit.
Exemptions from TDS under Section 193
TDS under Section 193 is not required in the following cases:
- Interest payable on government securities issued by the Central or State Government.
- Interest on listed debentures paid to individual or HUF bondholders (subject to conditions).
- Interest payable to mutual funds, banking companies, financial corporations, LIC, or UTI.
- Interest paid to entities eligible for exemption under section 10 of the Income Tax Act.
- Interest paid on zero-coupon bonds notified by the government.
TDS Deduction Timing
TDS must be deducted at the time of crediting the interest to the recipient's account or at the time of actual payment, whichever is earlier.
Due Dates for TDS Payment
- For non-government deductors: 7th of the following month in which TDS is deducted.
- For government deductors: Same day if paid through book adjustment or 7th of the next month if paid in cash or cheque.
- TDS Return Filing: Deductors must file quarterly TDS returns in Form 26Q:
| Return Period | Due Date |
| Q1 (Apr-Jun) | 31st July |
| Q2 (Jul-Sep) | 31st October |
| Q3 (Oct-Dec) | 31st January |
| Q4 (Jan-Mar) | 31st May |
Claiming TDS Credit
The recipient of interest can claim TDS credit while filing their income tax return (ITR) based on Form 26AS.
If excess TDS is deducted, the taxpayer can claim a refund by filing the appropriate ITR.
Lower TDS Deduction Certificate (Form 13): If the recipient expects a lower tax liability, they may apply for a lower TDS deduction certificate from the assessing officer.
Conclusion
Section 193 plays a vital role in ensuring tax compliance by mandating TDS deduction on interest on securities. Understanding the rates, exemptions, due dates, and claiming process is essential for both deductors and recipients to avoid penalties and ensure smooth tax compliance.
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