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 _at_ 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
  date of 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) _at_ 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 gt 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.