Section 194A
Deduction of tax at source - Interest other than
‘Interest on securities’
Notified institutions under
section 194A(3)(iii)(f)
Institution |
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Notification |
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No. |
Date |
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Industrial Credit
and Investment Corporation of India Ltd., Bombay |
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SO 3200 |
4-9-1967 |
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Gujarat
Co-operative Housing Finance Society Ltd., Ahmedabad |
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Maharashtra
Co-operative Housing Finance Society Ltd., Bombay |
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SO 3482 |
23-9-1967 |
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Andhra Pradesh
Industrial Development Corporation Ltd., Hyderabad |
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SO 4203 |
2-12-1967 |
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National
Industrial Development Corporation Ltd., New Delhi |
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SO 95 |
4-1-1968 |
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Madras
Industrial Investment Corporation Ltd., Madras |
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SO 1227 |
30-3-1968 |
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State
Industrial Investment Corporation of Maharashtra Ltd., Bombay |
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SO 1854 |
17-5-1968 |
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National
Small Industries Corporation Ltd., New Delhi |
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SO 2149 |
13-6-1968 |
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Kerala State
Industrial Development Corporation Ltd., Trivandrum |
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SO 2882 |
24-8-1968 |
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Hindustan
Steel Ltd., P.O. Hinoo, Ranchi |
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SO 4222 |
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Minerals
& Metals Trading Corporation of India Ltd., New Delhi |
23-11-1968 |
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State
Trading Corporation of India Ltd., New Delhi |
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Amratlal Ravjibhai
Parikh, Ahmedabad |
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SO 851 |
22-2-1969 |
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Madhya
Pradesh Audyogic Vikas Nigam Ltd., Bhopal |
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SO 1516 |
16-4-19691 |
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Madhya
Pradesh State Road Transport Corporation, Bhopal |
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SO 1581 |
21-4-19691 |
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Gujarat
Electricity Board, Baroda |
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SO 1825 |
30-4-1969 |
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Hindustan
Machine Tools Ltd., Bangalore |
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SO 2127 |
22-5-1969 |
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National
Textile Corporation Ltd., New Delhi |
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SO2128 |
25-5-1969 |
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Agricultural
Finance Corporation Ltd., Bombay |
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SO 2164 |
22-5-1969 |
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Tea Board
Calcutta |
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SO 3070 |
22-7-1969 |
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Gujarat
State Textile Corporation Ltd., Ahmedabad |
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SO 4712 |
21-11-1969 |
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Madhya Pradesh
State Textile Corporation Ltd., Madhya Pradesh |
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SO 825 |
8-2-1970 |
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Indian
Overseas Bank, Madras |
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Indian Bank,
Madras |
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Allahabad
Bank, Calcutta |
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Dena Bank,
Bombay |
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Canara Bank,
Bangalore |
SO 710 |
16-2-19702 |
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Union Bank
of India, Bombay |
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United
Commercial Bank, Calcutta |
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Bank of
Baroda, Bombay |
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Punjab
National Bank, New Delhi |
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Bank of
India, Bombay |
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Central Bank
of India, Bombay |
SO 710 |
16-2-1970 |
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United Bank
of India, Calcutta |
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Bank of
Maharashtra, Poona |
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Syndicate
Bank, Mysore |
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District, Taluka,
Nagar and Gram Panchayats constituted under the Gujarat Panchayat Act, 1961,
within the State of Gujarat |
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SO 828 |
24-2-1970 |
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Market Committees
established under the State Agricultural |
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SO 2203 |
16-6-1970 |
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Any
corporation established by a Central, State or Provincial Act |
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Any company
in which all the shares are held (whether singly or taken together) by the
Government or the Reserve Bank of India or a corporation owned by that Bank |
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SO 3489 |
22-10-1970 |
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Any
undertaking or body including a society registered under the Societies
Registration Act, 1860 (XXI of 1860) financed wholly by the Government |
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Cawnpore
Anti-Tuberculosis Association, Kanpur |
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SO 315(E) |
29-3-1972 |
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Amratlal
Ravjibhai Parikh, Ahmedabad |
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Amratlal
Ravjibhai Parikh, Baroda |
SO 362 |
16-11-1973 |
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Amratlal
Ravjibhai Parikh, Anand |
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Amratlal
Ravjibhai Parikh, Nadiad |
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Maharashtra
State Textile Corporation Ltd., Bombay |
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SO 2479 |
16-7-1974 |
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Kerala State
Textile Corporation Ltd., Cochin |
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SO 2677 |
21-9-1974 |
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Steel
Authority of India Ltd., New Delhi |
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SO 1247 |
11-3-1975 |
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Amratlal
Ravjibhai Parikh, Prop. Chandrakant |
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Amratlal Parikh,
Baroda |
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Amratlal
Ravjibhai Parikh, Prop. Mukundlal Amratlal Parikh, Nadiad |
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SO 1533 |
11-3-1976 |
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Amratlal
Ravjibhai Parikh, Prop. Balkrishna Amratlal Parikh, Anand |
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Indian Dairy
Corporation, Baroda |
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SO 1684 |
11-3-1976 |
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Development
Corporation of Konkan Ltd., Bombay |
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SO 1685 |
11-3-1976 |
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Madras
Fertilizers Ltd., Madras |
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SO 2043 |
25-5-1979 |
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Tamilnadu
Handloom Finance and Trading Corporation Ltd., Madras |
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SO 4000 |
26-11-1979 |
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National Textile
Corporation (Delhi, Punjab, Rajasthan) Ltd., New Delhi |
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SO 116 |
26-12-1979 |
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Pratap
Spinning, Weaving and Manufacturing Co. Ltd., Amalner |
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SO 723 |
28-2-1980 |
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Housing
Development Finance Corpn. Ltd., Bombay |
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SO 1724 |
2-6-1980 |
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Management
Development Institute, New Delhi |
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SO 1377 |
22-4-1981 |
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Textile
Corporation of Marathwada Ltd., Aurangabad |
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SO 3661 |
11-10-1982 |
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Aspee
Agricultural Research and Development Foundation, Bombay |
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SO 3779 |
22-10-1982 |
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Fertilisers
& Chemicals Travancore Ltd., Udyogamandal |
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SO 2412 |
18-5-1983 |
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Army Group
Insurance Fund, New Delhi |
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SO 819 |
24-2-1984 |
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Air Force
Group Insurance Society, New Delhi |
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SO 2825 |
5-6-1985 |
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Naval Group Insurance
Fund, New Delhi |
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SO 2551 |
29-5-1986 |
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West Bengal
Electronics Industry Development Corpn. Ltd., Calcutta |
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SO 621 |
28-1-1990 |
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West Bengal
Industrial Development Corpn. Ltd., Calcutta |
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SO 110(E) |
15-2-1999 |
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Insurance Regulatory
and Development Authority |
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SO 644(E) |
5-7-2000 |
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Maulana Azad
Education Foundation, New Delhi |
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SO 252 |
15-1-2003 |
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Tourism
Finance Corporation of India Ltd. |
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SO 253 |
15-1-2003 |
Notified
certificates/deposit schemes under section 194A(3)(vi):
Table
Description of Certificates/Deposit Schemes
1.
Post Office Recurring Deposit Account
2.
Post Office Time Deposit Account (1 year,
2 years, 3 years and 5 years)
3.
Post Office Monthly Income Account
4.
Kisan Vikas Patras
5.
National Savings Certificates (VIII
Issue)
6.
Indira Vikas Patras
Notification : No. SO 72(E), dated 24-1-1992.
Notified
schemes under section 194A(3)(vi):
(1)
The Scheme of Post Office (Time Deposits)
governed by the Post Office (Time Deposits) Rules, 1970.
(2)
The Scheme of Post Office (Recurring
Deposits) governed by the Post Office (Recurring Deposits) Rules, 1970—Notification
: No. SO 2878, dated 1-9-1970.
(3)
Investment Deposit Account Scheme, 1986—Notification
: No. SO 4247, dated 11-12-1986.
Notified
certificates :
Table
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Sl. No. |
Description of Certificates |
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1. |
National Savings Certificates (V Issue) |
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2. |
National Savings Annuity Certificates |
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3. |
National Savings Certificates (VI Issue) |
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4. |
National Savings Certificates (VII Issue) |
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5. |
Social Security Certificates |
Notification : No. SO 2703, dated 1-9-1990.
Point of
time for deduction - The material expression in section 194A(1) is
‘at the time of credit of such income in the account of the payee. . .’ When
interest is debited to ‘Interest Account’, or any other nominal account, the
debit is for a specific amount calculated with reference to the deductor’s
liability to a particular creditor in accordance with the terms and conditions
of the loan. What is, therefore, important is that the interest payable to a
creditor has constructively been credited to the account of the payee; the
apparent nomenclature of the particular account in which the credit is made is
not conclusive in the matter. The time for deduction would be when the interest
is credited. The time for making the payment of the tax deducted at source
would reckon from the date of credit of interest made constructively to the
account of the payee which would ordinarily be within one week from the last
day of the month in which deduction is made.—Circular : No. 288 [F. No.
275/46/79-IT(B)], dated 22-12-1980.
Deposits
in joint names - In the case of a deposit in joint names in the
absence of any proof to the contrary, both the persons can be treated as payees
for the purposes of deduction of tax under section 194A.
Persons
responsible for deducting the tax in the absence of any information to the
contrary, may aggregate the interest on a joint account with the interest on
deposit in the individual’s account who has higher interest income.
The
certificate of deduction of tax at source under section 203 will be given to
the person in whose name the interest on joint account has been aggregated.
Credit for the
payment of tax deducted at source under section 199 will be given to the person
in whose name the certificate under section 203 has been issued.
If any
objection is taken to the deduction of tax at source in the above manner or it
is contended that the joint account holders constitute a separate person and no
deduction of tax at source should be made, it will be up to them to point it
out to the person paying the interest by leading evidence, i.e., by
filing affidavits or statements in the manner laid down in the proviso to
sub-section (1) of section 194A.—Circular : No. 256 [F. No.
275/17/79-IT(B)], dated 29-5-1979.
Interest
payable on behalf of Government - The provisions of
section 194A are equally applicable to persons responsible for paying such
interest on behalf of the Government to any person resident in India.—Circular
: No. 22/68-IT(B) [F. No. 12/23/68-IT(B)], dated 28-3-1968/13-5-1968 as
modified by Letter F. No. 12/23/68-IT(B), dated 7-11-1968.
Discounting
of usance bills and hundis - Where the supplier
of goods makes over the usance bill/hundi to his bank which discounts the same
and credits the net amount to the supplier’s account straightaway without
waiting for realisation of the bill on due date, the property in the usance
bill/hundi passes on to the bank and the eventual collection on due date is a
receipt by the bank on its own behalf and not on behalf of the supplier. For
such cases of immediate discounting the net payment made by the bank to the
supplier is in the nature of a price paid for the bill. Such a payment cannot
technically be held as including interest and therefore no tax need be deducted
at source from such payments by the bank.
Where there is
no immediate discounting and the bank merely acting as agent receives on the
expiry of the period the payment for the bill from the buyer on behalf of the
supplier and credits it to him accordingly, the bank receives interest on
behalf of the supplier and the buyer will have to deduct the tax from the interest.—Circular:
No. 65 [F. No. 275/79/ITJ], dated 2-9-1971.
Interest
paid by consignors to commission agents - Tax will have to be deducted at source in accordance with section 194A
from the interest paid by consignors to their commission agents even where such
interest is paid under an arrangement whereby the commission agent retains for
himself the interest due to him at the time of paying to the consignor the
moneys due to him on account of the consignment.—Letter : F. No.
12/12/68-IT(A-II), dated 23-9-1968.
Payments
to exempt educational institutions/charitable trusts - So far as an educational institution whose income is exempt from tax
under section 10(22) is concerned, the provision of section 194A will
not apply to it and no deduction of tax at source from interest is required to
be made by the payers. As regards a charitable trust whose income is exempt
under section 11, a statement in writing may be made by the institution
concerned under section 194A, or the institution may apply for a certificate
for deduction at a lower rate or for authorisation of non-deduction at source
under section 197.—Letter : F. No. 12/113/68-IT (A-II), dated 28-10-1968.
Interest
under Land Acquisition Act - Interest payments
under Land Acquisition Act are covered by section 194A.—Circular: No. 526,
dated 5-12-1988.
The
responsibility for making deduction of tax at source under section 194A, should
be that of the Collector (Land Acquisition) or any other authority empowered
under the Land Acquisition Act, 1894, to acquire land for a public purpose as
laid down by that Act. When the concerned parties, whose land has been acquired,
go to the court of law, seeking higher compensation (with interest) and the
court allows their claims, the concerned authority which had acquired their
land, shall, while paying the compensation deduct tax at source from the amount
of interest forming part of the compensation and deposit the remaining amount
with the court of law, for disbursement to the successful litigants. The same
authority shall also issue the TDS certificates to the concerned parties in the
prescribed form—Letter : F. No. 275/109/92-IT(B), dated 21-9-1994.
Interest
on time deposits with banks - Only the interest
paid/credited by banks on time deposits after 1-10-1991 will be liable for
deduction of tax at source at the specified rate. The interest paid/credited
during the period 1-4-1991 to 30-9-1991 will be reckoned only for the purpose
of seeing whether the aggregate interest paid/credited during the financial
year exceeds the limit of Rs. 2,500—Circular: No. 626, dated 12-2-1992.
Interest
on cumulative deposits/debentures/bonds - In respect of cumulative deposits/debentures/bonds tax is required to be
deducted at source every time the interest is credited in the account books of
the payer and is not to be postponed till the maturity of the
deposit/debenture/bond—Circular : No. 643, dated 22-1-1993.
Commercial
papers/Certificates of Deposits - The difference
between the issue price and the face value of the Commercial Papers and the
Certificates of Deposits is to be treated as ‘discount allowed’ and not as
‘interest paid’. Hence, the provisions of the Income-tax Act relating to
deduction of tax at source are not applicable in the case of transactions in
these two instruments.—Circular : No. 647, dated 22-3-1993.
Reinvestment
term deposits - In the case of reinvestment term deposit, tax
has to be deducted at source at the time of credit of interest to the account
of the payee or at the time of payment thereof, whichever is earlier. If credit
is given to the account of the payee or payment is made to him annually, the
tax may be deducted annually. It is clarified that a credit to interest payable
account or suspense account, etc., is also taken as credit to the account of
the payee, even though this credit is not reflected separately in the payee’s
account—Circular : No. 715, dated 8-8-1995.
Variable
deposits - As variable deposits are in the nature of time
deposits, tax is deductible at source from interest on such deposits—Circular
: No. 715, dated 8-8-1995.
Retrospective
renewal of time deposits
- When a time deposit is
renewed retrospectively, the relevant date for deciding the applicability of
section 194A would be that date of renewal. Thus, if the time deposit is
renewed on or after 1-7-1995, the tax deduction at source will have to be made
from interest paid or credited in respect of such a time deposit—Circular :
No. 715, dated 8-8-1995.
Deposits
in co-operative banks
- A member of a co-operative
bank shall receive interest on both time deposits and deposits other than time
deposits with such co-operative bank without TDS under section 194A by virtue
of the exemption granted vide clause (v) of sub-section (3) of the
said section. The provisions of clause (viia) of the said sub-section
are applicable only in case of a non-member depositor of the co-operative bank,
who shall receive interest only on deposits other than time deposits made on or
after 1-7-1995 without TDS under section 194A.
A question has
also been raised as to whether nominal members, associate members and
sympathizer members are also covered by the exemption under section 194A(3)(v).
It is hereby clarified that the exemption is available only to such members who
have joined in application for the registration of the co-operative society and
those who are admitted to membership after registration in accordance with the
bye-laws and rules. A member eligible for exemption under section 194A(3)(v)
must have subscribed to and fully paid for at least one share of the
co-operative bank, must be entitled to participate and vote in the General Body
Meetings and/or Special General Body Meetings of the co-operative bank and must
be entitled to receive share from the profits of the co-operative bank.—Circular
: No. 9/2002, dated 11-9-2002.*
Exemption
to Sri Sathya Sai Trusts qua cases covered by sections 194A, 194-I & 194K - In the cases of Sri Sathya Sai
Central Trust, Shri Sathya Sai Medical Trust and Shri Sathya Sai Institute of
Higher Learning, Bangalore, the incomes by way of—
(i) interest other than ‘income by way of
interest on securities’,
(ii) rent, and
(iii) income in respect of units of a Mutual Fund
specified under section 10(23D) or of the Unit Trust of India,
may be paid to
these Institutions without deduction of income-tax at source. The provisions of
this circular shall be applicable for the financial years 2002-03 and 2003-04
(assessment years 2003-04 and 2004-05).—Circular : No. 12/2002, dated
22-11-2002.
Exemption
to Sri Ram Chandra Mission qua cases covered by sections 193, 194, 194A and
194K - In the case of Shri Ram Chandra Mission,
Chennai, the incomes by way of—
(i) Interest on securities,
(ii) Dividends,
(iii) Interest other than ‘income by way of
interest on securities’, and
(iv) Income in respect of units of a Mutual Fund
specified under section 10(23D) or of the Unit Trust of India,
may be paid to
the Mission without deduction of income-tax at source. The provisions of this
circular shall be applicable for the financial years 2002-03 and 2003-04
(assessment years 2003-04 and 2004-05)—Circular : No. 2/2003, dated 11-3-2003.
Exemption
to World Renewal Spiritual Trust qua cases covered by sections 193, 194A &
194K - In the case of World Renewal Spiritual Trust,
Mumbai, the incomes by way of—
(i) Interest on securities,
(ii) Interest other than ‘income by way of
interest on securities’, and,
(iii) Income in respect of units of a Mutual Fund
specified under section 10(23D) or of the Unit Trust of India,
may be paid to
the Trust without deduction of income-tax at source. The provisions of this
circular shall be applicable for the financial years 2002-03 and 2003-04
(assessment years 2003-04 and 2004-05)—Circular : No. 3/2003, dated
11-3-2003.
Other
exemptions - See
section 193.