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Updated On : June 25, 2025

TDS on Interest Other Than Securities – Section 194A

Section 194A of the Income Tax Act mandates the deduction of TDS on interest other than securities when such income is paid to a resident. This includes interest from fixed deposits, recurring deposits, loans, and other financial arrangements. It is distinct from TDS on securities under Section 193.

Applicability of Section 194A

This section applies to individuals, HUFs, firms, companies, co-operative societies, and others making interest payments to residents exceeding the prescribed threshold. For comprehensive understanding, refer to the key definitions under Income Tax.

Exclusions from Section 194A

Interest on securities – covered under Section 193
Interest paid to banks, LIC, UTI, and other notified institutions
Interest to partners by a firm
Interest credited to non-residents – governed by Section 195

TDS Rate under Section 194A

With PAN: 10%
Without PAN: 20% (as per Section 206AA)

Threshold Limits

₹5,000 – for deductors other than banks and post offices
₹40,000 – for banks and post offices (₹50,000 for senior citizens)

Submission of Form 15G/15H

To avoid TDS deduction, eligible individuals may submit Form 15G or 15H if their income is below the taxable threshold.

Time of Deduction

TDS must be deducted at the time of credit or payment of interest, whichever is earlier. This aligns with general TDS rules applicable in India.

Due Date for TDS Payment

The deducted tax must be deposited with the government by the 7th of the following month.

Examples

Example 1: A bank pays ₹45,000 as interest to a resident aged 45. Since the threshold is ₹40,000, TDS @10% applies on the excess ₹5,000.
Example 2: A senior citizen earns ₹48,000 as bank interest and submits Form 15H. No TDS will be deducted.
Example 3: Interest of ₹6,000 paid by a company to an individual without PAN. TDS @20% applies due to non-furnishing of PAN.

Consequences of Non-Deduction

Interest under Section 201(1A) for late deposit
Penalty under Section 271C for non-deduction
Disallowance of expense under Section 40(a)(ia)

Helpful Resources

Frequently Asked Questions (FAQs) on Section 194A

What is Section 194A of the Income Tax Act?

Section 194A mandates TDS on interest (other than interest on securities) paid to a resident by banks, financial institutions, firms, and others.

Who is liable to deduct TDS under Section 194A?

Banks, co-operative societies, post offices, companies, and individuals subject to tax audit under Section 44AB are required to deduct TDS on interest payments.

What is the TDS rate under Section 194A?

10% if PAN is provided; 20% if PAN is not furnished by the payee.

What is the threshold limit for deduction?

₹5,000 for non-bank deductors and ₹40,000 for banks and post offices (₹50,000 for senior citizens).

Can TDS under Section 194A be avoided?

Yes. Individuals whose total income is below the taxable limit can submit Form 15G or 15H to avoid TDS.

When is TDS to be deducted under Section 194A?

TDS must be deducted at the time of credit or payment, whichever is earlier.

Is interest on savings account covered under 194A?

No. Interest on savings accounts is not subject to TDS under Section 194A.

What forms are used for TDS compliance under 194A?

Form 26Q for quarterly return and Form 16A as TDS certificate.

What is the consequence of not deducting TDS?

Interest, penalty, and disallowance of expense under Section 40(a)(ia) may apply.

Is TDS applicable on recurring deposits?

Yes. Interest on fixed and recurring deposits is subject to TDS under Section 194A.

Are co-operative societies required to deduct TDS?

Yes, if their gross receipts exceed ₹50 crore and interest exceeds ₹50,000 (individual/HUF) or ₹40,000 (others).

Is interest paid to partners by firm covered?

No. Interest paid by a firm to its partner is not subject to TDS under Section 194A.

Is TDS applicable to NBFCs?

Yes. NBFCs must deduct TDS under Section 194A when paying interest exceeding threshold limits.

How to claim credit for TDS under 194A?

Use Form 26AS and Form 16A details while filing your ITR to claim the deducted TDS.

Can interest earned on PF be subject to TDS?

No. Interest on PF is not subject to TDS under Section 194A unless it is taxable as per other provisions.

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