Section 194A in the Income Tax Act deals with the deduction of TDS on interest income that does not originate through securities. So, it comprises the interest paid on fixed deposit, regular deposits advances and loans that are usually provided by NBFCs, banks post offices, co-operative societies and even by individuals (in some cases). However, this provision does not cover interest on bonds, such as debentures or bonds that fall under a separate section.
Let’s consider the applicableness of thresholds as well as exception cases, rates of deduction and the requirements for compliance under Section 194A for FY 2025-26.
Applicability of Section 194A
Section 194A is applicable only by residents. So, TDS on payments to non-residents are governed by Section 194A..
Who must be able to deduct TDS in accordance with section 194A?
The following entities/persons are required to deduct TDS in accordance with Section 194A:
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Banking companies
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Post Offices of the Post
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Cooperative societies involved in banking
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Firms and companies
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Tax audits for individuals and HUFs under Section 44AB for the previous financial year
Notice: Individuals and HUFs that are not subject to audit don’t have the obligation to subtract TDS.
TDS Threshold Limits in section 194A (FY 2025-26)
TDS must be removed only if the value of the interest exceeds a stipulated threshold in the course of a fiscal year. The thresholds vary based on the kind of the payer and the recipient
| Nature of Payer | Threshold Limit |
|---|---|
| Bank / Co-operative Bank / Post Office | Rs40,000 (General) |
| Rs50,000 (Senior Citizens) | |
| Additional Payers (e.g. banks, NBFCs companies and individuals) | Rs5,000 |
Note: Beginning in FY 2025-26 Banks and post offices are required to be able to deduct TDS only if the interest rate is higher than the limit of Rs40,000 for non-senior citizens, and the senior citizen rate is Rs50,000. For other organizations the limit remains at of Rs5,000.
When is TDS Not Required or Deducted at a Lower/NIL Rate?
1. Submission of Form 15G / 15H
In accordance with the Section 197A, where the recipient of interest makes an declaration on the form 15G (for individuals) or Form 15H (for seniors), no TDS is deducted, unless:
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This is a private individual (not an entity or a firm)
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Tax liability on income total is null
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The total amount of revenue is within the exempt amount
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PAN is available
In the event the case of Senior Citizens Saving Scheme (SCSS), the person who invested or the nominee (after the death) is also able to fill out these forms in order to save TDS.
2. Application in Form 13 under Section 197
So, the assessee may apply to the Assessing Officer by using Formula 13 to request an TDS lower or no declaration pursuant to Section 197. After approval, the taxpayer will take tax deductions at the lower rate.
Important points:
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The application can be made at anytime prior to deduction
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PAN is required
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The Certificate is valid during the financial year the year in which it was issued.
TDS Rates under Section 194A
| Condition | Applicable TDS Rate |
|---|---|
| PAN Provided | 10% |
| PAN Not Provided | 20% |
A cess or surcharge is not an additional charge to base rates. Therefore, TDS is flat at 10 percent and 20 percent dependent on the availability of PAN.
Time Limit to Deposit TDS
Deadlines for depositing TDS under section 194A: date of due for TDS deposits as per Section 194A include:
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For April through Feburary: 7th day of the next month.
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For March: 30th April
Examples:
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TDS debited on 15th June. Deposit before 7th July
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TDS taken on March 25th. The deposit must be made by the 30th of April.
In the event of a late deposit, it could result in penalties and interest So, timely compliance is essential.
TDS Return Filing and Compliance
After TDS is removed, the deductor will be legally required to:
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Make a deposit to TDS before the due date
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File quarterly TDS returns in Form 26Q
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Invoice Certificates of TDS (Form 16A) to payees within the specified time
Failure to comply could be a cause for sanctions under Sections 234E or 271H..
TDS Return Filing in Delhi – Need Professional Help?
To ensure precise and prompt TDS Return Filing that is timely and accurate in Delhi the best option is to work with a professional. A Best CA Firm can help you:
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Find out TDS the applicability of TDS.
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Calculate exact TDS amounts
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Complete Form 26Q in a timely manner.
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Issue and generate Form 16A
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Beware of warnings and penalty
No matter if you’re a company or owner of a business, NBFC, or cooperative society the an effective TDS management is crucial to remain compliant and to avoid being scrutinized.
Conclusion
Section 194A is a crucial element to ensure tax-compliant for interest income. If you’re a taxpayer or a recipient, knowing the provisions of Section 194A can help you avoid excessive tax deductions and penalties. Be aware of threshold limits, make declarations if you’re eligible, and look up an best CA firm to ensure a smooth TDS Return Filing in Delhi.
