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What are the conditions of non-applicability under TDS section 194A? |
| 5. | What happens when 15G /15 H is submitted? |
1. What is the applicability of TDS Section 194A?
TDS Section 194A is applicable to interest other than interest on securities credited or paid by:
• Any person other than an individual or HUF to any resident
• Individual or HUF who fall under *Section 44AB(a) or 44AB(b) to any resident
*Section 44AB(a) includes those Businesses whose Total turnover or gross receipts for a financial year exceeds Rs. 1 crores
*Section 44AB(b) includes those Professionals whose Total Gross Receipts for a financial year exceeds Rs. 50 Lakhs.
2. When is TDS u/s 194A deducted?
When the specified person as defined above, pays interest to a resident person, other than INTEREST ON SECURITY, then the payer shall deduct TDS
- At specified rates given below
- At the time of credit or payment of interest whichever is earlier.
- The implication of credit u/s 194A:
The word CREDIT has very interesting implications in this section. Suppose Interest to be paid by Specified person is not actually paid by Payer but instead credited to SUSPENSE a/c or INTEREST PAYABLE a/c or any other a/c, then also TDS need to be deducted and deposited to Government.
3. What is the rate of TDS applicable u/s 194A?
The rate of TDS applicable under section 194A is as follows:
|
S.No. |
Payer |
Threshold Limit |
Rate Applicable |
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1. |
Banking Company to which Banking Regulation Act 1949 applies |
10,000 |
10% |
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2. |
Co-operative Banks |
10,000 |
10% |
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Post office on deposits made with it |
10,000 |
10% |
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4. |
Any Other person |
5,000 |
5% |
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5. |
Banks or Co-operative bank or Post Office paying Interest to any person being a Senior Citizen (aged >60 years) |
40,000 |
10% |
In the above cases 1-3 and 5, the If Interest amount shall be computed branch wise. For Example, if Branch 1 of a bank pays Rs. 9000 as interest on Fixed deposits to Mr. A and Branch 2 pays Rs. 6000 as Interest on FD to Mr. A, then in such a case though total interest received by Mr. A is Rs. 15000 that is exceeding Rs. 10000, but since neither of the branch is paying more than Rs. 10,000, None of the 2 branches will deduct TDS in this case.
4. TDS u/s 194A not to be deducted in the following cases
1. When the Receiver of Interest is:-
• Banking Company
• Any financial corporation established by or under a Central, State or Provincial Act, or
• Life Insurance Corporation of India
• Unit Trust of India
• Any company or co-operative society carrying on the business of insurance, or
• Such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette;
3. Interest paid by Co-operative society to its members or to any other co-operative society.
4. If the aggregate amount of interest paid or credited during the FY does not exceed Rs 5000.
5. The aggregate amount of interest paid or credited during the FY does not exceed Rs 40000(Rs 50000 for senior citizens) in the following cases:
-time deposits in a banking company/ cooperative society engaged in the banking business.
- deposits with post office under notified schemes
6. Interest paid in relation to zero-coupon bond by a infrastructure company/public sector company/ scheduled bank after 1.6.2005
5. What happens when Form 15G / 15 H is submitted?
It is a declaration submitted by the recipient to the payer where no TDS is deductible under section 197A if the following conditions are met:
- The recipient should possess PAN
- Total income does not exceed the exemption limit
- Recipient is a person other than a company or firm
- Income in the PY is NIL
Form 15H is given for Senior Citizens and Form 15G for others. On submission of the same, the Bank will not deduct TDS.
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