Which Tds Section will be applicable on Bonds – Interest payments 194A OR 193?

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This discussion clarifies which Tax Deducted at Source (TDS) section applies to interest payments on bonds. While Section 194A covers interest from banks and loans, Section 193 specifically addresses interest on securities, including bonds and debentures. Therefore, TDS on bond interest payments falls under Section 193 of the Indian Income Tax Act, 1961.

praveen Nautiyal

praveen Nautiyal (Querist)
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03 August 2023 Dear Sir,

First my question is: Can a limited company issue bonds? If yes, which TDS section will apply when the Return-on-Investment (ROI) payment is made? 194A or 193.

Thanks & Regards,

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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03 August 2023 Yes, 194A TDS applicable.

praveen Nautiyal

praveen Nautiyal (Querist)
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04 August 2023 Dear Sir, But Section 194A, talk about Bank or RD Intt. and Loan Intt. AND SECTION -193 talk about interest on Bonds, Debenture and Securities.

Thanks & Regards,

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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04 August 2023 Company can issue bonds. TDS on interest is per section 193.

praveen Nautiyal

praveen Nautiyal (Querist)
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05 August 2023 Dear Sir,
Our Company is Public Ltd.(unlisted). We offer our customers an Investment Plan :-
Agreements Clause:-
Our Company is group of companies doing its business as Real Estate Firm doing its business in benefits in insfrastructure development, Plotting, Flats, Construction.

“Investment” means all the various Investments including, Real Estate and asset-backed investments in accordance with the terms of this agreement that have been, are being or will be entered into by the investment Manager for and on account of the investors.

The will pay total amount of investor (including Principal amount and Profit sharing amount) to the customer against his investment.

The Company will pay their profit sharing amount on monthly basis on their respective bank accounts.

Now, My question is that, which Tds Section will be applicable on this scenario, Section 193 (Interest on Securities) or Section 194A (interest other than interest on securities).

Thanks & Regards,

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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20 August 2023 Section 193 is a provision under the Indian Income Tax Act, 1961 that pertains to the deduction of tax at source (TDS) on interest income earned from securities. This section mandates that any company or institution that makes payment of interest on securities to a resident of India should deduct TDS on the interest paid.

As per the new Budget, From 1st April 2023, 10% TDS will be deducted from the interest income generated from Listed Bonds, and 20% TDS (as it was already subject to TDS under the IT Act) will be deducted from the interest income generated from Unlisted Bonds.

If you belong to the tax-exempt category or are subject to a lower income tax rate (below 10%), the interest earned from bonds will still be taxed at your relevant income tax slab rate. However, you can avoid a TDS deduction on your interest income by submitting Form 15G or Form 15H to the bond-issuing company. But in order to do that, a PAN card is compulsory. If the recipient of payment does not provide their Permanent Account Number (PAN), the deductor will be responsible for deducting TDS at the highest marginal rate.

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