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- Updated On : June 25, 2025
Complete Guide to TDS on Interest on Securities (Section 193) – DisyTax
TDS on interest on securities is governed by Section 193 of the Income Tax Act, 1961. It mandates deduction of tax at source by payers when paying interest on securities to resident recipients. This article provides a comprehensive explanation of Section 193, its scope, exemptions, threshold limits, forms, and practical examples.
What is Section 193?
Section 193 mandates that any person responsible for paying interest on securities to a resident must deduct tax at source before making the payment. This ensures advance tax collection by the government.
Applicability of TDS under Section 193
- Applicable only to interest paid on securities like debentures, bonds, and government securities.
- Applies only to residents. For non-residents, Section 195 applies.
- Includes corporate bonds and certain RBI savings bonds.
Rate of TDS under Section 193
The rate of TDS is 10% if PAN is provided. In the absence of PAN, TDS is deducted at 20% as per Section 206AA.
Threshold Limits
- No TDS if interest does not exceed ₹5,000 in a financial year in case of listed debentures paid to individuals via account payee cheque.
- No threshold in other cases – even ₹1 interest is liable to TDS.
Exemptions from TDS under Section 193
- Interest on Central Government securities and NSCs.
- Interest on bonds issued by institutions notified by the government.
- Interest on 7.75% RBI Savings (Taxable) Bonds.
TDS Compliance Requirements
- Deduct TDS at time of credit or payment, whichever is earlier.
- Deposit TDS with the government by the 7th of next month.
- File TDS returns in Form 26Q.
- Issue Form 16A to deductees.
Form 15G/15H Declarations
Eligible individuals can submit Form 15G (below 60 years) or Form 15H (senior citizens) if their total income is below taxable limit. In such cases, the deductor is not required to deduct TDS.
Example
Example: ABC Ltd pays ₹8,000 interest on debentures to Mr. Sharma. Since it exceeds ₹5,000, TDS @10% = ₹800 is deducted and deposited by ABC Ltd.
Common Errors and Solutions
- Error: Deducting TDS on government securities → Solution: Verify exemption list before deduction.
- Error: No PAN → Solution: Always collect valid PAN to avoid 20% deduction.
- Error: Delay in TDS deposit → Solution: Set automated reminders or use compliance tools.
- Error: Missing Form 26Q filing → Solution: Schedule quarterly returns in advance.
Frequently Asked Questions (FAQs) on Section 193
What is Section 193 of the Income Tax Act?
Section 193 covers TDS on interest paid on securities to resident individuals or companies.
Who is liable to deduct TDS under Section 193?
Any entity paying interest on securities to a resident must deduct TDS under this section.
What is the TDS rate under Section 193?
10% if PAN is furnished. If not, 20% as per Section 206AA.
What is the threshold for TDS deduction?
₹5,000 for listed debentures paid via account payee cheque. No threshold for others.
Is Section 193 applicable to government securities?
Most government securities are exempt, but verify notification status before deciding.
Is TDS applicable on debentures issued by private companies?
Yes, TDS is applicable on such interest payments to residents.
Can Form 15G or 15H be submitted for exemption?
Yes, eligible individuals can avoid TDS by submitting Form 15G/15H.
What if TDS is not deducted or deposited?
Interest, penalty, and disallowance of expenses may apply under Sections 201 and 40(a)(ia).
Which forms are used for compliance?
Use Form 26Q to file returns and issue Form 16A to the payee.
When is TDS under Section 193 required to be deducted?
At the time of credit to account or payment, whichever is earlier.
Is TDS applicable to non-residents under Section 193?
No. For non-residents, TDS is deducted under Section 195.
Is surcharge or cess applicable on this TDS?
No, surcharge and cess are not applicable on TDS under this section.
Can TDS be claimed in ITR?
Yes, the deductee can claim the TDS amount as credit in their income tax return.
What is the due date to deposit TDS?
On or before the 7th of the following month in which TDS was deducted.
How to verify TDS deduction by payer?
You can verify via Form 26AS available on the Income Tax e-filing portal.