TDS on interest income

Tax Deducted at Source (TDS) on Interest Income: Due Dates for Payments and Returns

Understanding TDS on Interest Income

Section 194A of the Income Tax Act, 1961, mandates the deduction of tax at source on specific types of interest income. This mechanism ensures the timely collection of tax liabilities by the government.

Types of Interest Income Subject to TDS:

  • Interest on Deposits:
    • Fixed Deposits (FDs)
    • Recurring Deposits (RDs)
    • Company Deposits
  • Interest on Loans and Advances: Interest received on loans and advances may be subject to TDS under certain conditions.

TDS Applicability Thresholds:

  • TDS is generally applicable when the annual interest income exceeds specific thresholds (e.g., Rs. 40,000 for individuals below 60 years and Rs. 50,000 for senior citizens for FDs).

TDS Rates:

  • With PAN: 10%
  • Without PAN: 20%

Exemptions and Deductions:

  • Interest on Savings Accounts: Generally exempt from TDS.
  • Interest Income Below Threshold: Individuals can claim exemption by submitting Form 15G (below 60 years) or Form 15H (senior citizens) if their total interest income remains below the taxable limit.

TDS Payment Due Dates:

  • General Rule: The entity paying the interest income is typically responsible for deducting TDS within seven days from the end of the month in which the interest payment is made.

TDS Return Filing Due Dates:

  • Quarterly Basis:
    • Q1 (April-June): July 31st
    • Q2 (July-September): October 31st
    • Q3 (October-December): January 31st
    • Q4 (January-March): May 31st of the following year

Key Considerations:

  • Responsibility of the Payer: The entity making the interest payment is legally obligated to deduct TDS and fulfill the necessary reporting requirements.
  • Penalties for Non-Compliance: Failure to comply with TDS regulations can result in penalties and interest charges for the entity responsible for the deduction.
  • Importance of Accurate Record-Keeping: Maintaining meticulous records of interest income received and TDS deducted is crucial for both the payer and the recipient for tax compliance purposes.

Additional Details:

  • TDS Certificate: The entity deducting TDS is required to issue a TDS certificate (Form 16A) to the recipient, which details the amount of TDS deducted.
  • Tax Credit: The recipient can claim the TDS deducted as a credit against their overall tax liability during income tax return filing.
  • Excess TDS Deduction: If TDS is deducted at a higher rate than applicable, the recipient can claim a refund during income tax return filing.

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