Sec. 194A: Interest other than Interest on Securities

1. Sec.194A:Interest other than Interest on Securities Who is liable to deduct tax? The person (other than an Individual or HUF) who is responsible for paying to a resident, any income by way of interest other than ‘Interest on Secutiries”, TDS u/s 194A to be made also by individuals & HUFs covered u/s 44AB.

2. Sec.194A:Interest other than Interest on Securities Rate of TDS : (F.Y. 2010-11) Resident – Non Companies: 10% [No S.C/E.C/SHEC] Resident – Domestic Companies 10% [No S.C/E.C/SHEC] In all cases – 20% - if PAN is not quoted with effect from 01-04-2010 [No S.C/E.C/SHEC]

3. Sec.194A:Interest other than Interest on Securities When TDS is to be made ? At the time of payment of interest in cash or by issue of cheque or draft or by any other mode or credit of it to any account, whichever is earlier.

4. Sec.194A:Interest other than Interest on Securities Credit to any Account: Whether called “Interest payable a/c.” or Suspense a/c. or by any other name in the books of the Payer.

5. Sec.194A:Interest other than Interest on Securities Interest as referred to in Sec. 194A includes payments made in respect of ; Intercorporate deposits/loans Public Deposits Loans Late payment of bills Payment by consignor to commission agent.

6. Sec.194A:Interest other than Interest on Securities Where no tax is to be deducted at source u/s. 194A (i) If the aggregate amount of interest during the F.Y. does not exceed Rs.10,000/- payable by a Banking company, Co-op.society engaged in banking business and post office. (ii) If the amount of interest does not exceed Rs.5,000/- in any other case.

7. Sec.194A:Interest other than Interest on Securities (B) In the case of the following Payees: (i) Banking Company or a Co-op Society engaged in banking business (ii) Financial Corporation established under a central, state or provincial Act (iii) LIC/UTI/ any Company or Co-op Society carrying on Insurance business / such other institution / association or body or their class as notified by Central Government in the Official Gazette.

8. Sec.194A:Interest other than Interest on Securities (iv) Partner of a firm if the payer is firm. (v) Member of a Co-op.society or any Co-op.society where payer is a Co-op. society. (vi) Depositor of a notified scheme framed by Central Government. Notified Schemes: Post Office R.D. A/c./ Post office Time Deposits / Monthly income A/c. / N.S.C. / Kisan Vikas Patras/ Indira vikas patras.

9. Sec.194A:Interest other than Interest on Securities (vii) Depositor with a Primary agricultural society or a primary credit society or a co-op. land mortgage bank or a Co-operative Land Development Bank. (viii) Depositor of a banking company or of a Co-op. society engaged in banking business where Time deposits have been made before 1-7-1995. (ix) Any assessee where interest payable to him under direct tax laws.

10. Sec.194A:Interest other than Interest on Securities (x) Interest credited to Non-Resident (External) A/c. (xi) Interest on R.D. & Savings A/c. with banks or Co-op. societies (xii) Interest on the compensation amount awarded by Motor Accidents claims Tribunal where the aggregate interest paid during the F.Y. does not exceed Rs. 50,000/-

11. Sec.194A:Interest other than Interest on Securities (xiii) Interest payable by an infrastructure Capital Company or Infrastructure Capital Fund or a Public Sector Company or Scheduled Bank in relation to a Zero Coupon Bond issued by such company or fund or Public Sector Company or Bank.

12. Sec.194A:Interest other than Interest on Securities (C) Where Self declaration under Form No. 15G is by a person other than a company or firm . In the case of a senior citizen (65 years or more) the declaration should be under Form No. 15H. Form No 15G /15H is not valid in the absence of PAN of the declarant & TDS to be made @ 20%.

13. Sec.194A:Interest other than Interest on Securities (D) No TDS by the off-shore Banking unit from the interest paid:- (i) On deposit made on or after 1-4-2005, by a non-resident or a person not ordinarily resident in India. (ii) On borrowing on or after 1-4-2005, from a non-resident or a person not ordinarily resident in India.

14. Sec.194A:Interest other than Interest on Securities (E) Entities like Charitable Trusts, Scientific Research Associations etc., whose income is exempt U/s. 10 on fulfillment of certain conditions – may apply for no deduction in Form No. 13.

15. Sec.194A:Interest other than Interest on Securities (F) Certain Entities whose income is unconditionally exempt u/s. 10 (Example: Funds or Authorities or Boards or Bodies, by whatever name called) (G) On filing of certificate U/s. 197 by the Payee.

16. Sec.194A:Interest other than Interest on Securities Notes: (i) TDS to be made on Investment in “Securitised Bonds”. (ii) TDS to be made on Bill Discounting Charges camouflaged as Finance Charges. (iii) TDS U/s. 194A to be done on accrual basis every year, irrespective of the date of payment on maturity.

17. Sec.194A:Interest other than Interest on Securities (iv) If Renewal of deposit is made retrospectively, TDS U/s.194A to be made from the dateof renewal (on the interest payments) (v) No TDS U/s. 194A in respect of R.Ds. (vi) Deposits in Joint names – The limit of Rs.10,000/- should be seen only w.r.t. the First Holder.

18. Sec.194A:Interest other than Interest on Securities (vii) TDS U/s. 194A to be made on accrual basis annually in respect of cumulative deposits. (viii) TDS U/s. 194A to be made on Interest on RFC deposits to Resident but not ordinarily Resident Persons, even if such income is exempt U/s. 10 . (ix) Form H should be available with the deductor before the payment or credit of interest.

19. Sec.194A:Interest other than Interest on Securities (x) It is the responsibility of the deductor to forward Form 15G/15H to the CIT or CCIT within 7 days, from the end of the month in which it is received – Failure to do so may attract penalty U/s. 272A(2)(f) @ Rs.100/- for each day of default

20. Sec.194A:Interest other than Interest on Securities (xi) TDS U/s. 194A to be made on the Gross Interest payable and not on the net interest after mutual setoff between the parties. (xii) Interest referred U/s. 194A is not only Taxable but also any interest.

21. Sec.194A:Interest other than Interest on Securities (xiii) False declaration in Form 15G/15H Prosecution U/s. 277. (a) If the amount of tax involved is > Rs. 1 lakh, Rigorous imprisonment for a term which shall not be less than 6 months but which may extend to 7 years and with fine. (b) In any other case, not less than 3 months / which may extend to 3 years and with fine.

22. Sec.194A:Interest other than Interest on Securities xiv) Abetment of False return etc. U/s. 278: (Example: Bank Manager forwarding False Form No. 15G to the CIT) ----- Same Penalty as in (xiii) above. (xv) Trust making interest payments to Trustees who are assessed either in Individual capacity or representative capacity – TDS to be made since the Trust is not entitled to go behind the constitution and see the status of the beneficiary.

23. Sec.194A:Interest other than Interest on Securities (xvi) A minor cannot file a declaration in Form No. 15H. (xvii) Form 15H submitted after the year end (i.e 1st April) TDS should have been deducted. The deductor violated the law and incurred the liability by not deducting before the year end (i.e 31st March).

24. Sec.194A:Interest other than Interest on Securities (xviii) TDS U/s. 194A is to be made when interest is paid in pursuance to court orders. Similarly, TDS is to be made on Interest payment on awards of other Tribunals like Motor Accidents Tribunal, Insurance Companies in delayed payments on settlement of claims. (xix) TDS U/s. 194A is to be made on Interest Payments to Canfin Homes (which are distinct from Banks)

25. Sec.194A:Interest other than Interest on Securities (xx) payer of interest not concerred with tax liability of payee. (xxi) Hire purchase agreements not loan – Not covered u/s 194A. (xxii) Interest paid by assessee along with loan repaid –TDS is a must u/s 194A.