Section 194A – TDS on Interest (Other than Securities)

Applicability of Section 194A - TDS on Interest (Other than Securities):

TDS applicable on interest (other than on securities) paid to residents, such as interest on fixed deposits, unsecured loans, or other borrowings.

Who must Deduct TDS:

• Individuals/HUFs liable for tax audit under section 44AB in the preceding FY.

• All other persons (e.g. Companies, Firms, AOPs, BOIs) are mandatorily required to deduct.

  
  

When to Deduct TDS:

Section 194A – TDS on Interest (Other than Securities) must be deducted at the time of credit or payment, whichever is earlier, including credit to suspense or interest payable accounts.

TDS Rates & Threshold Limits (w.e.f. 1st April 2025):

Category	TDS Rate	Threshold Limit
Others (non-bank cases)	10%	₹10,000 (Before 01/04/2025 ₹ 5,000)
Banks & Co-op. Banks	10%	₹50,000 (Before 01/04/2025 ₹ 40,000)
Senior Citizens (Banks only)	10%	₹1,00,000 (Before 01/04/2025 ₹ 50,000)

Note: If PAN is not provided, TDS is deducted at a higher rate (20%).

Definition of "Interest":

Includes interest on loans, deposits, or any debt, and charges related to unused credit limits or services for borrowed funds.

Exemptions from TDS under Section 194A: No TDS is required in the following cases:

• Interest paid to:

  • Banks, co-operative banks, LIC, UTI, insurance companies

  • Partners by the firm

  • Central or State Government

• Interest on:

  • Savings accounts

  • Post Office schemes (like NSC, KVP)

  • Deposits with primary agricultural/co-op. land mortgage banks

• If total interest is below threshold limits

• Where Form 15G/15H is furnished by the payee

• Interest paid on delayed trade payments or chit dividends

Co-operative Societies (w.e.f. FY 2020-21): Co-operative societies must deduct TDS if:

• Turnover exceeds ₹50 crore in preceding FY, and

• Interest paid to a resident exceeds:

  • ₹50,000 (Senior Citizen)

  • ₹40,000 (Others)

Other Points:

• Interest payments other than interest on securities is covered under Section 193, not 194A.

• Interest payments to non-residents are governed by Section 195, not 194A.

• Adjustments for excess/short deduction during the year are allowed.

• The government may notify lower or NIL TDS rates for specific persons via notification.

Read about TDS under Section 194B on winnings from lotteries, games, gambling, and betting in the next article.