TDS Under Section 194A — Interest Income Other Than Bank Interest

Section 194A of the Income Tax Act requires TDS deduction on interest payments other than interest on securities (which is covered by Sections 193 and 194). This includes interest paid by companies, cooperative societies, banks (on certain accounts) and others on loans, deposits and other credit arrangements. Here is the complete compliance guide.

Who Must Deduct TDS Under Section 194A?

Any person (other than individuals and HUFs below the tax audit threshold) who is responsible for paying interest (other than interest on securities) to a resident must deduct TDS under 194A. This includes:

• Companies paying interest on unsecured loans, inter-corporate deposits
• Banks paying interest on fixed deposits (194A also covers bank interest above the enhanced threshold)
• Cooperative societies and housing finance companies paying interest on deposits
• Firms and LLPs paying interest on partner capital or deposits
• NBFCs paying interest on deposits and borrowings from individuals

Threshold Limits for TDS Under 194A

• Interest from banks (including cooperative banks): TDS if interest exceeds ₹40,000 per year for regular taxpayers (₹50,000 for senior citizens above 60 years)
• Interest from other sources (companies, NBFCs, cooperatives, etc.): TDS if interest exceeds ₹5,000 per year to a single person

TDS Rate Under Section 194A

• Standard rate: 10%
• If PAN not provided: 20% (Section 206AA)

Form 15G and 15H — Exemption Declarations

Recipients can avoid TDS deduction by submitting declarations:

• Form 15G: For individuals below 60 years and Hindu Undivided Families — declaring that total income is below the taxable limit
• Form 15H: For senior citizens (60+ years) — declaring that tax on estimated income is nil

The payer must not deduct TDS once Form 15G/15H is received (subject to verification of eligibility). These declarations are valid for the full financial year and must be renewed annually.

Compliance Requirements

• Deduct TDS at the time of credit or payment, whichever is earlier
• Deposit TDS by 7th of the following month
• File quarterly Form 26Q with Section 94A entries
• Issue Form 16A to the recipient annually
• Report 15G/15H receipts in the quarterly TDS return

Conclusion

Section 194A TDS applies broadly to interest payments and is a common compliance gap for companies and NBFCs. SPOTON manages TDS deduction, deposit and return filing for all sections including 194A for businesses in Kerala. Contact us for expert TDS compliance services.