TDS ON INTEREST PAYMENTS BY BANKS

November, 2011

TDS ON INTERESTINTEREST ON BANK DEPOSITS

TDS applicable to interest on term / fixed deposits cumulative deposits reinvestment deposits variable / flexi deposits

TDS not applicable to interest on recurring deposits deposits in savings bank accounts

GENERAL EXEMPTIONSPayments to the following persons are

exempt from TDS u/s. 196 –

Government

RBI

Mutual funds

Corporations established under central Law whose income is exempt

TDS ON INTERESTEXEMPTIONS FROM TDS –

Interest paid to banks, cooperative banks, financial institutions established under the law, LIC, UTI, Insurance companies

Interest paid by a cooperative bank to its member or another cooperative society

interest paid on deposits by primary agricultural credit society / primary credit society / cooperative land mortgage bank / cooperative land development bank

Interest paid to notified institutions/associations/bodies Interest paid by banks and cooperative banks in respect

of deposits other than time deposits

TDS ON INTERESTINTEREST ON BANK DEPOSITS

interest payable on all the deposits in the

branch standing in the name of a payee should be aggregated even if multiple Ids were alloted

interest payable in the case of a deposit in joint names should be aggregated with the interest payable to joint account holder having higher interest income (circular No. 256)

CASES OF NON DEDUCTION / LOWER DEDUCTION

Cases of payees other than company or firm who furnish declarations in form No 15G / 15H

Cases of payees covered by certificate of non deduction or deduction at a lower rate issued by the Income tax department u/s.197

CONDITIONS FOR VALIDITY OF 15G / 15H DECLARATIONS

Declarations should not be accepted routinely

Blank / incomplete declarations are invalid

Declaration in form No. 15G not valid if the amount paid / credited exceeds the tax exemption limit

Declarations valid only for the assessment year mentioned therein

CONDITIONS FOR VALIDITY OF 15G / 15H DECLARATIONSSeparate declarations required for each year of depositDeclarations to be obtained in each year afresh

Declarations valid only for the payment / credit made subsequent to the date of declaration

Declarations furnished without PAN are not valid with effect from 1-4-2010

Declarations to be forwarded to the jurisdictional Commissioner of Incometax on or before 7th of the following month

CERTIFICATES OF NON-DEDUCTION/LOWER DEDUCTIONCertificate valid prospectively from the date

of its issue

Valid till the end of the financial year only

Valid to the extent of the interest payable amount mentioned therein

Instances of payments liable to TDS

Payment of rent for the bank/ATM premises-194IPayment of car hire charges-194CPayment for hiring of equipment such as generator

etc.,-194IPayment of courier charges -194CPayment of commission to recovery/mobilizing agents-

194HPayment of fees for credit verification-194HPayment of fees for valuation of immovable

properties/jewellery-194J

Instances of payments liable to TDSPayment of fees to advocates/chartered accountants-

194JPayment of fees to MICR centres for clearance of

cheques/demand drafts-194JPayment of AMC charges for maintenance of

generator/a.c./lift etc.-194CPayment of AMC charges for maintenance of

computer/networking hardware/software-194JPayment of charges for supply of manpower for data

entry-194CPayment of charges for security services-194CPayment towards cash management service-194J