Section 193 of the Income Tax Act

 

Section 193 of the Income Tax Act deals with TDS (Tax Deducted at Source) on interest on securities. Here's an explanation of its key aspects:


 

 Applicability:

  • Section 193 applies to any person responsible for paying interest on securities.
  • This includes individuals, Hindu Undivided Families, companies, or any other entity responsible for paying interest on securities.

 

Types of Payments Covered:

  • TDS under Section 193 is applicable to interest payments made on securities such as debentures, government securities, bonds, and other similar financial instruments.

 

TDS Rate:

  • The TDS rate under Section 193 varies based on the type of security and the nature of the payee.
  • For interest payments to residents, the TDS rate is generally 10%.
  • For non-residents, the TDS rate may differ and is governed by tax treaties between India and the respective country of the non-resident.

 

Threshold Limit:

  • There is no specific threshold limit mentioned under Section 193 for the applicability of TDS.
  • TDS is applicable on all interest payments made on securities subject to certain exemptions or lower rates as per the provisions of the Act or relevant tax treaties.

 

Time of Deduction:

  • TDS should be deducted at the time of credit of interest to the account of the payee or at the time of payment, whichever is earlier.
  • If the interest is credited or paid in advance, TDS should be deducted at the time of credit or payment, whichever is earlier.

 

Filing of TDS Returns:

  • The deductor is required to file TDS returns quarterly using Form 26Q.

 

Exemptions:

  • Certain categories of securities may be exempted from TDS under Section 193 subject to fulfillment of specified conditions.

 

Example: Suppose a company pays annual interest of ₹50,000 on debentures to an individual investor.

  • Since the payment is interest on securities, TDS will be applicable under Section 193.
  • The company will deduct TDS at the rate of 10% on the interest amount of ₹50,000, which amounts to ₹5,000.
  • The company will then pay ₹45,000 (₹50,000 - ₹5,000) as net interest income to the investor.

Understanding the provisions of Section 193 is important for both payers and payees of interest on securities to ensure compliance with tax laws and regulations


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