TDS ON INTEREST PAYMENTS BY BANKS

1. TDS ON INTEREST PAYMENTS BY BANKS November, 2011

2. TDS ON INTEREST INTEREST ON BANK DEPOSITS • TDS applicable to interest on • term / fixed deposits • cumulative deposits • reinvestment deposits • variable / flexi deposits • TDS not applicable to interest on • recurring deposits • deposits in savings bank accounts

3. GENERAL EXEMPTIONS • Payments to the following persons are exempt from TDS u/s. 196 – • Government • RBI • Mutual funds • Corporations established under central Law whose income is exempt

4. TDS ON INTEREST EXEMPTIONS FROM TDS – • Interest paid to banks, cooperative banks, financial institutions established under the law, LIC, UTI, Insurance companies • Interest paid by a cooperative bank to its member or another cooperative society • interest paid on deposits by primary agricultural credit society / primary credit society / cooperative land mortgage bank / cooperative land development bank • Interest paid to notified institutions/associations/bodies • Interest paid by banks and cooperative banks in respect of deposits other than time deposits

5. TDS ON INTEREST INTEREST ON BANK DEPOSITS • interest payable on all the deposits in the branch standing in the name of a payee should be aggregated even if multiple Ids were alloted • interest payable in the case of a deposit in joint names should be aggregated with the interest payable to joint account holder having higher interest income (circular No. 256)

6. CASES OF NON DEDUCTION / LOWER DEDUCTION Cases of payees other than company or firm who furnish declarations in form No 15G / 15H Cases of payees covered by certificate of non deduction or deduction at a lower rate issued by the Income tax department u/s.197

7. CONDITIONS FOR VALIDITY OF 15G / 15H DECLARATIONS Declarations should not be accepted routinely Blank / incomplete declarations are invalid Declaration in form No. 15G not valid if the amount paid / credited exceeds the tax exemption limit Declarations valid only for the assessment year mentioned therein

8. CONDITIONS FOR VALIDITY OF 15G / 15H DECLARATIONS • Separate declarations required for each year of deposit • Declarations to be obtained in each year afresh • Declarations valid only for the payment / credit made subsequent to the date of declaration • Declarations furnished without PAN are not valid with effect from 1-4-2010 • Declarations to be forwarded to the jurisdictional Commissioner of Incometax on or before 7th of the following month

9. CERTIFICATES OF NON-DEDUCTION/LOWER DEDUCTION • Certificate valid prospectively from the date of its issue • Valid till the end of the financial year only • Valid to the extent of the interest payable amount mentioned therein

10. Instances of payments liable to TDS Payment of rent for the bank/ATM premises-194I Payment of car hire charges-194C Payment for hiring of equipment such as generator etc.,-194I Payment of courier charges -194C Payment of commission to recovery/mobilizing agents-194H Payment of fees for credit verification-194H Payment of fees for valuation of immovable properties/jewellery-194J

11. Instances of payments liable to TDS Payment of fees to advocates/chartered accountants-194J Payment of fees to MICR centres for clearance of cheques/demand drafts-194J Payment of AMC charges for maintenance of generator/a.c./lift etc.-194C Payment of AMC charges for maintenance of computer/networking hardware/software-194J Payment of charges for supply of manpower for data entry-194C Payment of charges for security services-194C Payment towards cash management service-194J