Sec 196 & 194 i and sec 196 & 194c & j 0f income tax
This query is : Resolved
Querist : Anonymous
Querist :
Anonymous
(Querist)
19 July 2012
Dear Experts,
As per 196 no TDS would come on pmt to Gov & RBI etc...
now this exemption will come only for 194 I or will it extend to 194 c & 194 J also...
Plz clarify..
As per 196 no TDS would come on pmt to Gov & RBI etc...
now this exemption will come only for 194 I or will it extend to 194 c & 194 J also...
Plz clarify..
19 July 2012
Section 196 applies to all kinds of the payments to the Government & RBI.
.
.
Querist : Anonymous
Querist :
Anonymous
(Querist)
19 July 2012
Dear Paras,
Kindly clarify:
Sec 196 says any interest & dividend paid to
Government, RBI , Local Authority no need to deduct TDS...
As per the above we can inferer that it would not applcable to
194C & 194J.....
Regards
Aditya..
Kindly clarify:
Sec 196 says any interest & dividend paid to
Government, RBI , Local Authority no need to deduct TDS...
As per the above we can inferer that it would not applcable to
194C & 194J.....
Regards
Aditya..
23 July 2025
Great question, and it highlights a common confusion between **Section 196** and the **TDS sections** like **194C**, **194I**, and **194J**.
Let’s clear it up step-by-step:
---
## ✅ **What does Section 196 say?**
Section **196** of the Income Tax Act says:
> **No deduction of tax** shall be made by any person from **any interest or dividend** payable to:
* The **Government**
* The **Reserve Bank of India**
* Any **corporation established under a Central Act** and **exempt from income tax**
* **Mutual Funds** notified under Section 10(23D)
🔍 So, **Section 196** applies **only to "interest" and "dividend" income**, **not to all types of payments**.
---
## ✅ Application to Other Sections like 194C, 194J, 194I:
### Let's examine:
| TDS Section | Nature of Payment | Is Sec 196 exemption applicable? |
| ----------- | -------------------------------------- | -------------------------------------------------------- |
| **194C** | Contract payments | ❌ No, not covered under Sec 196 |
| **194J** | Professional/technical fees | ❌ No, not covered under Sec 196 |
| **194I** | Rent | ❌ No, not covered under Sec 196 |
| **194A** | Interest (other than sec 196 interest) | ✅ Only if paid to Govt/RBI etc., and falls under Sec 196 |
So, **Section 196 is not a blanket exemption from all TDS** — it **only covers TDS on interest and dividend**, and **only when paid to specified exempt persons**.
---
## ✅ Then What About Payments to Government or RBI under 194C/194J?
Here's the clarification:
* If you make **any other payment (e.g., contract fees, rent, professional fees)** to the **Government, RBI, or other exempt entities**, then:
* TDS **may still apply under normal sections** (like 194C, 194J)
* BUT — the **CBDT Circular No. 18/2017** clarified that **no TDS is required** if the **recipient is exempt from income tax and files declaration** to that effect
---
## ✅ Summary
| Question | Answer |
| --------------------------------------------------------------- | -------------------------------------------------------------------------- |
| Does Sec 196 apply to 194C/194J/194I? | ❌ No – It applies **only to interest and dividend** |
| Is TDS required on contract/professional fees paid to Govt/RBI? | ✅ TDS applies **unless the payee is fully exempt and confirms in writing** |
| Should we take care before skipping TDS to Govt entities? | ✅ Yes – Always obtain **written confirmation or exemption certificate** |
---
## 📌 Final Recommendation:
If you're making payments to:
* **Government**
* **RBI**
* **Tax-exempt entities under Central Acts**
✅ **Check whether the entity is exempt from income tax**, and get a **self-declaration** or **copy of notification** before deciding not to deduct TDS under **194C, 194J**, etc.
Let me know if you'd like a sample **TDS exemption declaration** format or the latest **CBDT circulars** on this.
Let’s clear it up step-by-step:
---
## ✅ **What does Section 196 say?**
Section **196** of the Income Tax Act says:
> **No deduction of tax** shall be made by any person from **any interest or dividend** payable to:
* The **Government**
* The **Reserve Bank of India**
* Any **corporation established under a Central Act** and **exempt from income tax**
* **Mutual Funds** notified under Section 10(23D)
🔍 So, **Section 196** applies **only to "interest" and "dividend" income**, **not to all types of payments**.
---
## ✅ Application to Other Sections like 194C, 194J, 194I:
### Let's examine:
| TDS Section | Nature of Payment | Is Sec 196 exemption applicable? |
| ----------- | -------------------------------------- | -------------------------------------------------------- |
| **194C** | Contract payments | ❌ No, not covered under Sec 196 |
| **194J** | Professional/technical fees | ❌ No, not covered under Sec 196 |
| **194I** | Rent | ❌ No, not covered under Sec 196 |
| **194A** | Interest (other than sec 196 interest) | ✅ Only if paid to Govt/RBI etc., and falls under Sec 196 |
So, **Section 196 is not a blanket exemption from all TDS** — it **only covers TDS on interest and dividend**, and **only when paid to specified exempt persons**.
---
## ✅ Then What About Payments to Government or RBI under 194C/194J?
Here's the clarification:
* If you make **any other payment (e.g., contract fees, rent, professional fees)** to the **Government, RBI, or other exempt entities**, then:
* TDS **may still apply under normal sections** (like 194C, 194J)
* BUT — the **CBDT Circular No. 18/2017** clarified that **no TDS is required** if the **recipient is exempt from income tax and files declaration** to that effect
---
## ✅ Summary
| Question | Answer |
| --------------------------------------------------------------- | -------------------------------------------------------------------------- |
| Does Sec 196 apply to 194C/194J/194I? | ❌ No – It applies **only to interest and dividend** |
| Is TDS required on contract/professional fees paid to Govt/RBI? | ✅ TDS applies **unless the payee is fully exempt and confirms in writing** |
| Should we take care before skipping TDS to Govt entities? | ✅ Yes – Always obtain **written confirmation or exemption certificate** |
---
## 📌 Final Recommendation:
If you're making payments to:
* **Government**
* **RBI**
* **Tax-exempt entities under Central Acts**
✅ **Check whether the entity is exempt from income tax**, and get a **self-declaration** or **copy of notification** before deciding not to deduct TDS under **194C, 194J**, etc.
Let me know if you'd like a sample **TDS exemption declaration** format or the latest **CBDT circulars** on this.
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