1. What is Section 194A?
- Section 194A deals with deduction of TDS on interest other than interest on securities like interest on fixed deposits, interest on loans and advances other than banks.
- This Section is only applicable to a resident. Thus, the provisions of Section 194A are not applicable in case of payment of interest to a non-resident.
- Payments made to non-residents are also covered under TDS mechanism. However, tax in such a case is to be deducted as per Section 195.
2. When does TDS under Section 194A need to be deducted?
The payer shall deduct TDS if the amount of such interest paid or credited or is likely to be paid or credited in a financial year, exceed Rs 40,000 where the payer is
- Banking company or any bank or a banking institution
- Co-operative society engaged in the business of banking
- Post office (on deposit under scheme framed and notified by Central Government).
and Rs 5,000 in any other case.
3. What is the rate of TDS?
Following are the applicable rates of taxes:
- 10% when the PAN is furnished;
- 20% if the PAN is not provided.
- No surcharge, education cess or SHEC shall be added to the above rates. Hence, tax will be deducted at source at the basic rate.
4. What is the time limit for depositing the TDS?
- Tax deducted during the month of April to February is to be deposited on or before the 7th of next month. tax deducted in the month of March is to be deposited on or before April 30.
- For example, tax deducted on April 25 is to be deposited on or before May 7 and tax deducted on March 15 is to be deposited on or before April 30.