Section 193 of the Income Tax Act, of 1961, specifies provisions related to the Tax Deducted at Source (TDS) on interest income from securities. According to this section, any individual or entity paying interest on securities to a resident must deduct TDS before making the payment. The primary objective behind this provision is to ensure that you collect taxes in advance at the source of income, minimizing evasion and ensuring timely tax collection.
The rules under Section 193 apply exclusively to residents, which means that NRIs receiving interest on securities are not subject to TDS under this section.
Any individual or entity that provides interest on securities to a resident in India must deduct tax at source under Section 193. This includes government organizations, companies, corporations, and other entities that issue securities to raise capital.
You deduct TDS at a rate of 10% on the interest income from securities. You make the deduction when you credit the income to the payee’s account or during the actual payment, whichever occurs earlier.
Certain exemptions from TDS deduction apply under Section 193. Below are some scenarios where TDS is not required:
A company does not need to deduct TDS if it pays interest on its listed debentures to a resident individual.
Conditions for exemption:
Interest payable to the following institutions is exempt from TDS:
Exemptions are applicable for interest payable to:
You may also want to know Section 12A Income Tax Act
Certain interests are exempt from TDS deductions under Section 193. These include:
Section 193 of the Income Tax Act ensures the advance collection of taxes on interest income derived from securities. It mandates the deduction of TDS at 10% on such income and includes a variety of exemptions, such as interest on government bonds, debentures, and savings certificates. By deducting taxes at the source, it helps streamline tax collection for the government while ensuring compliance.
Entities paying interest on securities must remain compliant with the provisions of Section 193 to avoid penalties and ensure seamless transactions.
Section 193 specifies provisions for tax deduction at source (TDS) on interest income derived from securities paid to residents in India.
The TDS rate under Section 193 is 10%, provided the payee has submitted a valid PAN. If not, TDS is deducted at the maximum marginal rate.
Any individual or entity paying of interest on securities to a resident is required to deduct TDS before making the payment.
Yes, certain exemptions exist, such as National Defence Bonds, interest on 7-year National Savings Certificates, and listed debentures, among others.
For interest income credited in March, TDS must be paid by April 30th. For other months, TDS should be paid by the 7th of the following month.
Yes, a payee can apply for a Nil TDS certificate under Section 197 if eligible, based on their income situation.
Non-compliance with Section 193 may lead to penalties and interest charges for the entity responsible for the deduction, as well as possible disallowance of the interest expense under the Income Tax Act.
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