TDS SECTION 194A WITH EXAMPLES || TDS ON INTEREST

 What is TDS section 194A?

Section 194A of the Income Tax Act in India deals with the deduction of tax at source (TDS) on interest other than interest on securities. It outlines the provisions for deducting TDS on various types of interest payments such as interest on fixed deposits, savings accounts, and other interest-bearing instruments. The section specifies the rates and conditions under which TDS should be deducted. If you have specific questions or details you'd like to know about Section 194A, feel free to ask.

Example

Certainly, let's consider a hypothetical example to illustrate how TDS under Section 194A might work:

Suppose you have a fixed deposit with a bank, and the bank pays you interest of Rs. 10,000 annually. As per Section 194A, the bank is required to deduct TDS on this interest income before paying it to you.

If the TDS rate under this section is, for example, 10%, the bank would deduct Rs. 1,000 (10% of Rs. 10,000) as TDS. You would receive the remaining amount of Rs. 9,000, and the deducted TDS of Rs. 1,000 would be deposited with the government on your behalf by the bank.

You would also receive a TDS certificate from the bank, indicating the amount of TDS deducted. When filing your income tax return, you can claim credit for this TDS while calculating your final tax liability.

Limit

As of my last knowledge update in January 2022, the TDS limit under Section 194A for deducting tax on interest income is typically Rs. 40,000 for individuals below 60 years of age and Rs. 50,000 for senior citizens. If the interest income exceeds these limits, TDS is applicable. However, these limits and rules are subject to change with amendments in tax laws, so it's advisable to check the latest regulations or consult with a tax professional for the most up-to-date information.

Applicability

Section 194A of the Income Tax Act applies to various types of interest payments. It is applicable when interest is credited or paid by a person (other than an individual or Hindu Undivided Family) to a resident in India. The section covers a range of interest-bearing instruments, including fixed deposits, recurring deposits, and savings accounts.

The applicability of Section 194A involves the deduction of tax at source (TDS) by the payer before making the interest payment to the payee. The specific conditions, rates, and exemptions may vary, so it's important to refer to the latest amendments or seek advice from a tax professional for precise details based on your situation.