TDS rates

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Dinesh Nair (Querist)

22 August 2009 The tax ready recknors states that the TDS rate for interest "other than securities" in the case of a domestic company is -20%

However, if one looks at the Finance Act -Schedule-I, part-2, the rate is mentioned as 10%

Can anybody clarify, pl.

Aditya Maheshwari

Aditya Maheshwari (Expert)

22 August 2009 Yes i have also noticed such inconsistency.

I think it should be taken at 10% as Finance Act is of more weightage.

Other peoples comments are also invited.

Aditya Maheshwari

Aditya Maheshwari (Expert)

22 August 2009 Other peoples comments are also invited

Dinesh Nair

Dinesh Nair (Querist)

24 August 2009 I too want to agree with your views. But considering that neither the budget proposal nor the notes to the clauses covers this aspect, I tend to think it to be a typographical error. It will also lead to a situation wherein an individual and corporates will be treated at par for TDS rates, which I feel is unlikely.

Thanks & Regards
Dinesh

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

28 July 2025 Good observation! Here’s a detailed clarification on the **TDS rate for interest other than securities** for a **domestic company** in the context of your FY 2009 discussion:

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## 1. **What does the Finance Act say?**

* **Finance Act, Schedule I, Part II** generally specifies the TDS rates for various payments.
* For **interest other than securities**, it lists a rate of **10%** for payments to residents (including companies).
* This rate applies for interest payments such as bank interest, interest on loans, deposits, etc.

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## 2. **Where does the 20% figure come from?**

* Sometimes, tax ready reckoners or secondary references may mistakenly mention **20%**.
* This could be a **typographical error** or confusion with **Section 194A** where rates might have been different earlier or for other categories.
* Historically, the **20% rate** could have been cited for **non-resident interest** or under different provisions.

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## 3. **Which rate has precedence?**

* **The Finance Act’s rate (10%) prevails** as it is the authoritative legal text.
* The **tax ready reckoner or other sources** are only secondary references and can have errors.

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## 4. **Practical implications:**

* For a **domestic company receiving interest (other than securities)**, **deduct TDS at 10%** under **Section 194A**.
* This aligns with the legislative intent and ensures compliance.

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## 5. **Additional notes:**

* There should ideally be **differential TDS rates** for individuals, HUFs, and companies.
* However, in this case, it appears **10% applies to both individuals and companies** (subject to conditions and thresholds).
* Always check for updates in the Finance Act for the specific year as rates may vary.

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### **Summary:**

| Payment Type | Payee Type | Correct TDS Rate FY 2009 | Reference |
| -------------------------------- | ---------------- | ------------------------ | ------------------------------- |
| Interest (other than securities) | Domestic company | **10%** | Finance Act Schedule I, Part II |

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If you want, I can help you with updated TDS rates for interest for more recent years or help cross-check any other discrepancies you find!

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