Section 193 of the Income Tax Act mandates TDS (Tax Deducted at Source) on interest earned from securities, such as government bonds, debentures, and other listed securities. It ensures that tax is collected in advance on such income.
When Does Section 193 Apply?
TDS under Section 193 applies when any resident receives interest on:
- Government securities
- Debentures of listed companies
- Corporate bonds
- Public sector company bonds
- Taxable savings bonds (like 7.75%)
TDS Rate Under Section 193
| Case | TDS Rate |
|---|---|
| With valid PAN | 10% |
| Without PAN (or invalid PAN) | 20% |
No surcharge or cess is added.
Not applicable to NRIs (they fall under Section 195).
Threshold Limits for TDS
TDS is not deducted if:
- Interest on debentures issued by listed companies ≤ ₹5,000 per year per person (and paid via A/c Payee cheque).
- 7.75% Savings Bonds interest is ≤ ₹10,000/year.
- Government securities (like bonds) – Certain ones are fully exempt.
Example
- You hold ₹1 lakh worth of listed company debentures.
- Interest paid = ₹6,000
- Since it exceeds ₹5,000, and is not via A/c payee cheque, TDS @10% = ₹600 is deducted.
Exemptions from Section 193 TDS
TDS is not deducted if:
- The recipient submits Form 15G/15H (for no/lower income tax).
- Securities are held by:
- LIC, GIC or its subsidiaries
- Recognised Mutual Funds
- Government bodies
- RBI
- Institutions notified under Section 194A or specific notifications
Key Points Summary
| Feature | Details |
|---|---|
| Applies To | Interest on securities (resident payees) |
| TDS Rate | 10% (with PAN) |
| No TDS Below | ₹5,000 (debentures), ₹10,000 (bonds) |
| Exemption Forms | 15G / 15H |
| Applicable Section | 193 (for residents only) |
Why It Matters
- Helps you track advance tax deducted on interest income
- Ensures you’re not caught by surprise when filing returns
- Lets you claim TDS credit via Form 26AS or ITR
