Section 193 of Income Tax Act provides that 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.
The various aspects required to be discussed in respect of Section 193 of Income Tax Act are as under : –
- Who are liable to deduct tax u/s 193 ? Who should be the Payee ?
- Timing of Deduction
- Rate and Minimum Threshold for deduction of taxes
- Whether payment qualifies as a Interest on securities ?
- Exemptions and Non Deduction Cases
Each of these cases are discussed as under : –
Who are liable to deduct tds under Section 193 ?
TDS under Section 193 has to be deducted when the Payor is a : –
- Local authority, Corporation or company, including principal officer thereof
- Central or State Government
However, such person are liable to deduct TDS only when the recipient is a resident. Non resident recipient are not covered under Section 193.
Timing of Deduction – Section 193 of Income Tax Act
Tax u/s 193 has to be deducted at the time of credit of such interest income to the account of the payee (including credit to a Suspense Account/ Interest Payable Account or any other account , which would be considered as a credit), 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 .
Rate and Minimum Threshold for deduction of taxes under Section 193
- 10% on interest on securities ;
- 20% (if PAN is not provided by recipient) – as per the provisions of Section 206AA
- As per lower WHT certificate , if any, obtained u/s 197 .
|1.||Person (other than a company) resident in India who pays interest on|
|(A)||Any debentures or securities other than a security of the Central or State Government for money issued by or on behalf of any local authority or a corporation established by a Central, State or Provincial Act;||10%|
|(B)||Any debentures issued by a Company where such debentures are listed on a recognised stock exchange in India in accordance with the Securities Contracts (Regulations) Act, 1956 and any rules made thereunder||10%|
|(C)||Debentures not listed on a recognised stock exchange||10%|
|(D)||8% / 7.75% Savings Taxable Bonds||10%|
|Any interest on securities||10%|
Whether payment qualifies as a Interest on securities under Section 193?
Section 193 covers payments, which are in the nature of following payments : –
- Interest on debentures or other securities issued for money by or on behalf of local authority, a company or a corporation established by State Central for provincial act
- Interest on securities of Central or state government – Subject to certain exemptions
Exemptions and Non Deduction Cases
Section 193 excludes the following payments from deduction of TDS u/s 193 : –
- Central Government notified debentures issued by specified authorities
- Interest on any security issued by the Central or State Government
- Securities specified in proviso to Section 193
- Interest payable on a listed Security issued by a company in dematerialized form as per SCRA
- Interest payable to LIC, General Insurance Corporation of India, other insurer, in respect of securities owned by them beneficially
- Interest paid or payable by a widely held Company on listed/ unlisted debentures to a resident individual/ HUF by an account pay cheque not exceeding Rs. 5,000
- Interest payable on a listed company Security in dematerialized form
- Interest on 8% Saving (Taxable) Bonds 2003 / 0r 7.75% Saving (Taxable) Bonds 2018 , issued by central government it to the extent of Rs. of 10000
- Payment to new Pension System Trust referred to in Section 44F/ other Bodies notified by Central Government