Section 193: TDS Rate on Interest on Securities

Section 193 deals with tax deducted on interest on securities. Any person making payment to the resident in respect of interest on securities as defined in clause 28B of Section 2 shall deduct TDS at the time of payment or credit to the books of accounts whichever is earlier. Tax shall be deducted @ 10%.

Section 193 shall not be applicable on the following:

• No TDS in case of individual shareholders where payment is made by account payee cheque.
• No TDS in case of dividends referred to in Section 115-O.

Exemption Limit u/s 193 of income tax act

There is no exemption limit specified in case of TDS u/s 193 except two following cases:

• In the case of debenture issued by listed companies the limit is rs. 5000 provided such amt. should be given by an account payee cheque
• in case of 8% saving (taxable) bonds the limit is rs. 10000

TDS rate u/s 193

if the conditions are fulfilled then TDS has to be deducted at the rate of 10%. In case the recipient does not furnish his PAN to the deductor TDS will be deducted at the rate of 20%.

TDS at a lower rate

Any person receiving such interest may apply in form no. 13 to AO to get a certificate for lower deduction of TDS or no deduction of TDS. As per the certificate issued the person responsible for deduction of TDS will be deduction tax at the rate as mentioned in the certificate.

Form 15G or 15H in the case of TDS u/s 193

A person other than a company or firm can submit form 15G/15H as applicable to then for not deducting TDS u/s 193 if their total income is not taxable.

The updated chart of tax Deduction at Source for FY 2015-16 or AY 2016-17 is as under:

Reference:

As Per Section 193, of the Income Tax Act, 1961-

Interest on securities.

3.  The person responsible for paying [to a resident] any income [by way of interest on securities] shall, [at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier], deduct income-tax at the rates in force on the amount of the interest payable :

Provided  that no tax shall be deducted from—

(i)  any interest payable on 4¼ per cent National Defence Bonds, 1972, where the bonds are held by an individual, not being a non-resident; or

(ia)  any interest payable to an individual on 4¼ per cent National Defence Loan, 1968, or 4¾ per cent National Defence Loan, 1972; or

(ib) any interest payable on National Development Bonds; or

(iia) any interest payable on 7-Year National Savings Certificates (IV Issue); or

(iib) any interest payable on such debentures, issued by any institution or authority, or any public sector company, or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(ii)  any interest payable on 6½ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, where the Bonds are held by an individual not being a non-resident, and the holder thereof makes a declaration in writing before the person responsible for paying the interest that the total nominal value of the 6½ per cent Gold Bonds, 1977, or, as the case may be, the 7 per cent Gold Bonds, 1980, held by him (including such bonds, if any, held on his behalf by any other person) did not in either case exceed ten thousand rupees at any time during the period to which the interest relates;

(iii)  any interest payable on any security of the Central Government or a State Government:

Provided that nothing contained in this clause shall apply to the interest exceeding rupees ten thousand payable on 8% Savings (Taxable) Bonds, 2003 during the financial year;

(iv)  any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if—

(a)  the amount of interest or, as the case may be, the aggregate amount of such interest paid or likely to be paid on such debenture during the financial year by the company to such individual or Hindu undivided family does not exceed five thousand rupees; and

(b)  such interest is paid by the company by an account payee cheque;

(v)  any interest payable to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), in respect of any securities owned by it or in which it has full beneficial interest; or

(vi)  any interest payable to the General Insurance Corporation of India (hereafter in this clause referred to as the Corporation) or to any of the four companies (hereafter in this clause referred to as such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any securities owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest; or

(vii)  any interest payable to any other insurer in respect of any securities owned by it or in which it has full beneficial interest;

(viii)  any interest payable on any security issued by a company, where such security is in dematerialised form and is listed on a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the rules made thereunder.

Explanation : For the purposes of this section, where any income by way of interest on securities is credited to any account, whether called “Interest payable account” or “Suspense account” or by any other name, in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee and the provisions of this section shall apply accordingly.