Section 193 is applicable to interest on certain specific securities from which TDS has to be deducted at the time of payment or credit to the books of accounts which ever is earlier. Transfer to any account like suspense account other than the party account will be considered as if such interest amount has been credited in the books of account.
Any person who is responsible for paying interest on securities to a resident shall deduct TDS at the rate of 10%.
Section 193 is not applicable to interest incurred from following cases;
- any interest payable on such debentures, issued by any institution or authority, or any public sector company, or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as the Central Government may, by notification in the Official Gazette, specify in this behalf;
- any interest payable on any security of the Central Government or a State Government: Provided that nothing contained in this clause shall apply to the interest exceeding rupees ten thousand payable on 8% Savings (Taxable) Bonds, 2003 during the financial year;
- any interest payable to an individual, who is resident in India, on debentures issued by a company in which the public are substantially interested, being debentures listed on a recognised stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956), and any rules made there under, if—
(a) the interest is paid by the company by an account payee cheque; and
(b) the amount of such interest or, as the case may be, the aggregate of the amounts of such interest paid or likely to be paid during the financial year by the company to such individual does not exceed [two thousand and five hundred rupees
- any interest payable to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), in respect of any securities owned by it or in which it has full beneficial interest; or
- any interest payable to the General Insurance Corporation of India (hereafter in this clause referred to as the Corporation) or to any of the four companies (hereafter in this clause referred to as such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any securities owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest; or
- any interest payable to any other insurer in respect of any securities owned by it or in which it has full beneficial interest;
- any interest payable on any security issued by a company, where such security is in dematerialized form and is listed on a recognized stock exchange in India in accordance with the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the rules made there under
- any interest payable to an individual or HUF, who is resident in india, on any debenture issued by a company in which the public are substantially interested, if –
- the amount of interest or as the case many be the aggregate amount of such interest paid or likely to be paid on such debenture during the financial year by the company to such individual or Hindu undivided family does not exceed Rs. 5, 000
- Such interest is paid by the company by an account payee cheque.
Exemption limit under section 193 of income tax act
There is no exemption limit specified in case of TDS under section 193 except two following cases;
- In the case of debentures issued by listed companies the limit is Rs. 5000 provided such amount should be given by an account payee cheque. And
- In case of 8% saving (taxable) bonds the limit is Rs. 10, 000.
TDS rate under section 193
If above conditions are full filled then TDS has to be deducted at the rate of 10%. In case the recipient does not furnish his PAN to the deductor TDS will be deducted at the rate of 20%.
TDS at a lower rate
Any person receiving such interest may apply in form no 13 to the assessing officer to get a certificate for lower deduction of TDS or no deduction of TDS. As per the certificate issued the person responsible for deduction of TDS will be deducting tax at the rate as mentioned in the certificate.
Form 15G or 15H in the case of TDS under section 193
A person other than a company or firm can submit form 15G/15H as applicable to then for not deducting TDS under section 193 if their total income is not taxable.
This form 15G or 15H has to be submitted in duplicate. One copy of such certificate has to be sent to the commissioner on or before 7th day of month next following the month in which the declaration is furnished to him.