Section 193 of Income Tax Act – TDS on Interest on Securities

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 .

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

TDS Sections

• Section 192 of Income tax act
• Section 193 of Income tax act
• Section 194 of Income tax act
• Section 194B of Income tax act
• Section 194C of Income tax act
• Section194EE of Income tax act
• Section 194H of Income tax act
• Section 194I of Income tax act
• Section 194IA of Income tax act
• Section 194 J of Income tax act
• Section 194K of Income tax act
• Section 194LD of Income tax act
• Section 194LBB of Income tax act
• Section 194M of Income tax act
• Section 194N of Income tax act
• Section 194O of Income tax act
• Section 194Q of Income tax act
• Section 194R of Income tax act