Section 194A.
TDS on interest other than securities.
Interest on bank deposits, loans, debentures (other than securities)
When it applies
Section 194A applies on interest payments made by banks, financial institutions, co-operative banks, and post offices on deposits — fixed deposits, recurring deposits, savings beyond the Section 80TTA limit, and similar. It also applies to interest on loans extended to a business, on debentures (other than listed securities), and on most non-bank interest payments where the payer is responsible for TDS.
Who must deduct
Banks, NBFCs, co-operative societies engaged in banking, post offices, and any entity (individual, HUF subject to audit, firm, company) paying interest. Individuals and HUFs not subject to tax audit are not required to deduct under 194A — but they must if they cross the audit threshold.
Common mistakes
- Not aggregating interest across branches of the same bank for threshold computation.
- Treating Section 80TTA exemption as a TDS exemption — it's only for taxability in the recipient's hands.
- Missing higher TDS under Section 206AB for non-filers (twice the normal rate or 5%, whichever higher).
- Forgetting Form 15G/15H — if eligible, the recipient can declare nil tax liability to avoid TDS.
Frequently asked
Do I deduct TDS on interest accrued but not paid?
Yes. Section 194A triggers on credit or payment, whichever is earlier. Interest credited to the depositor's account on year-end attracts TDS even if not actually paid out, provided the threshold is crossed.
Is interest paid to a co-operative society or government entity exempt?
Yes — interest paid to a co-operative society, the Central or State Government, certain financial corporations, and to other notified entities is outside the scope of Section 194A. Confirm the recipient is in the exempt list before skipping deduction.
How does Form 15G/15H work?
Form 15G (for individuals under 60) and Form 15H (for senior citizens) are self-declarations that the recipient's total taxable income is below the basic exemption limit. If valid declarations are on file, the payer does not deduct TDS even if the threshold is crossed. The payer must report these to the IT Department.