Section 193 – TDS on Interest on Securities

TDS on Interest on Securities

TDS (Tax Deducted at Source) is applicable when interest is paid on securities like government bonds, debentures, and corporate securities. The person making the payment must deduct tax before paying the interest to the recipient.

When to Deduct TDS?

TDS must be deducted at the time of crediting the interest to the recipient’s account or paying it, whichever happens first.

Who is Covered?

TDS applies only if the interest receiver is a resident of India.

How Much TDS to Deduct?

• 10% TDS is deducted from the interest amount.

• If the recipient does not provide a PAN, a higher TDS rate applies.

Is There Any Threshold Limit?

As per the Budget 2025, from 1st April 2025, no TDS is required if the interest amount is ₹10,000 or less. Before this date,  No exemption threshold allowed .

What is Considered as Interest on Securities?

• Interest on government bonds (Central or State Government).

• Interest on debentures issued by companies.

• Interest on securities issued by local authorities or corporations.

When is TDS Not Required?

TDS on interest on securities is not deducted in the following cases:

• If the interest is paid to insurance companies.

• If the interest paid by a widely held company is ₹5,000 or less (with conditions).

• If the security is in demat form and traded on a stock exchange.

• If the interest is on Central or State Government securities.

• If the interest is from 8% Saving (Taxable) Bonds, 2003, and is ₹10,000 or less.

• If the recipient submits Form 15G or Form 15H for tax exemption.

• Payments made to the New Pension System Trust.

• Payments to notified institutions that are exempt from TDS.

• Payments under Section 10(23DA) to a securitization trust.

• If the recipient’s income is fully tax-exempt under Section 10.

  
  

TDS on interest on securities is deducted at 10%, but from 1st April 2025, no TDS is required if the interest is ₹10,000 or less. Some cases, like payments to insurance companies, government securities, and exempt institutions, do not attract TDS.

Next, we will discuss TDS on dividends (Section 194), which applies when companies pay dividends to shareholders. Stay tuned!