Here, we shall discuss Tax to be Deducted at source on Interest on
Securities as per Indian Income Tax Act.
person responsible for paying interest on securities to a resident
is required to deduct income tax at source at the rates in force.
is deductible either at the time of credit to the account of the payee
or at the time of payment, whichever is earlier.
this purpose, credit to any suspense account or interest payable
account or any other account by whatever name called shall be deemed to
be a credit of such income to the account of the payee.
Note: As per section 206AA, with effect from 1.4.2010, every person who
receives income subject to TDS under chapter XVIIB (covers all TDS
cases) shall furnish to the deductor, his PAN. If PAN is not so
furnished, the rate of TDS will be at the rates specified in the Act or
at the rates currently in force or at 20% whichever is higher. Please
note that this applies to non residents also.
is not deductible in respect of interest payable on the following:
payable on any security of the Central/State Government. But, interest
during a financial year payable on 8% Savings (Taxable) bonds, 2003 is
subject to deduction of tax at source.
payable on debentures issued by any institution or authority or any
public sector company or co-operative society notified by the Central
payable on any security owned by the Life Insurance Corporation of
payable to an individual on debentures which are issued by a company in
which public are substantially interested provided that the debentures
are listed on a recognised
stock exchange in India and the payment is made by an account payee cheque and the aggregate amount
of payments to the individual during the financial year does not exceed
payable to General Insurance Corporation of
or to any of the four companies formed by virtue of schemes framed
under section 16(1) of the General Insurance Business (Nationalisation) Act.
payable to any other insurer.
Interest payable to an individual or HUF resident in
India on any debenture issued by a company in which public are
substantially interested if the interest payable or total amount of
interest payable during the financial year does not exceed Rs.5000 and
such interest is paid through an account payee cheque.
- Since the income of funds
established for the benefit of Armed Forces is exempt under section
10(23AA), no tax should be deducted at source under section 193 from
the income of such funds. [Circular No. 735 dt.30-1-1996].
- In case of a provident fund
whose income is exempt under section 10(25)(ii), income by way of
interest on securities of Central and State Governments may be paid to
such funds without deduction of tax at source. [Circular No. 741
- In case of deep discount bonds,
tax is to be deducted at source at the time of redemption only. For
this purpose, the difference between issue price and redemption price
is taken as the interest payable. [Circular No.2/2002 dt.15-2-2002].
The deduction of tax is at the time of redemption only irrespective of
whether the bond holder has declared income on the bonds on accrual
basis year to year or at the time of redemption of the bonds. But, if
he has declared income on accrual basis, he can apply for non-deduction
of tax or deduction of tax at a lower rate to the Assessing Officer.
[Circular No.4/2004 dt.13-5-2004.]
- In case of a resident individual
who has been an original subscriber to the deep discount bonds and the
difference between issue price and redemption price does not exceed the
maximum amount not chargeable to tax, and no tax is payable on his
total income, and he has been following accrual method to declare
income on the bonds from year to year, such an individual can furnish a
declaration in Form 15H (now 15G) for non-deduction of tax at source.
[Circular No.4/2004 dt.13-5-2004.]
Issues on Indian Income Tax Deducted at Source: Introduction
on Contractors(Sec 194C) TDS
on Rent(Sec 194-I)
Other than Interest on Securities TDS
On Professional Fees (Sec 194J)
on Other Sums
on Salaries(Sec 192)
Disclaimer: All the information
provided above is for informative purposes only. You are advised to
consult your tax consultant before you act upon any of the above
information. In spite of this, if any person acts upon this information
and suffers any loss, we are not to be held liable.
Though all efforts have been made to provide latest information, you
are advised to check latest circulars, latest changes in law etc from
the Indian Income Tax Department.
a participant in the Amazon Services LLC
Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees
by advertising and linking to (amazon.com, or endless.com, MYHABIT.com, SmallParts.com, or