There are several amendments pertaining to TDS from interest.
3.1 Interest on fixed deposits with banks attracts TDS under Section 194A. Only exception to this was in respect of interest paid by co-operative banks to their members.
3.2 Now, Section 194A(3)(v) has been amended to expressly provide that payment of interest on time deposits by a cooperative bank to its members will not be exempt from withholding tax requirement. Therefore, with effect from 1st June 2015, when interest paid or credited in excess of the prescribed limit (which is presently Rs. 10,000/-), tax will have to be deducted at source by the cooperative bank.
3.3 The existing provisions that permit a depositor to furnish Form 15G/15H for non-deduction of tax at source from the interest wherever applicable, will apply to the interest on deposits with cooperative banks also.
3.4 The exemption from withholding tax under Section 194A(3)(viia)(b) in respect of payment of interest on time deposit taken from a cooperative society will continue to be available to a cooperative bank. Similarly, a primary agricultural society or a primary credit society or a cooperative land mortgage bank or a cooperative land development bank shall continue to enjoy the exemption under Section 194A(viia)(a), and will accordingly not be required to deduct tax at source from interest payment.
3.5 The definition of the term time deposits under Explanation 1 to Section 194A(3) has been amended to include recurring deposits within its scope. As a result, now for all banks, whether cooperative or commercial, interest paid on both time deposits and recurring deposits will attract the TDS provisions.
3.6 Many bank depositors avoided TDS from interest on bank fixed deposits by splitting their deposits amongst different branches of the same bank. This was on account of the current provision whereby the threshold limit of exemption from TDS is applicable to the interest credited or paid by every branch on an individual basis. With a view to curbing this practice, it is now proposed that TDS under Section 194A will be with reference to income credited or paid by the banks as a whole (in those cases where core banking solutions have been adopted by the concerned bank).
3.7 Interest paid on compensation amount awarded by the Motor Accident Claim Tribunal has been brought under the ambit of TDS. If the aggregate amount of such a payment during the financial year exceeds R50,000/-, there will be a TDS at the time of payment of the interest. Consequently, it follows that there would be no requirement to deduct tax at source at the time of credit of interest.
All the above amendments are effective from 1st June 2015.
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Interest on fixed deposits with banks attracts TDS under Section 194A. Only exception to this was in respect of interest paid by co-operative banks to their members.
Now, Section 194A(3)(v) has been amended to expressly provide that payment of interest on time deposits by a cooperative bank to its members will not be exempt from withholding tax requirement. Therefore, with effect from 1st June 2015, when interest paid or credited in excess of the prescribed limit (which is presently Rs. 10,000/-), tax will have to be deducted at source by the cooperative bank.
The existing provisions that permit a depositor to furnish Form 15G/15H for non-deduction of tax at source from the interest wherever applicable, will apply to the interest on deposits with cooperative banks also.
The exemption from withholding tax under Section 194A(3)(viia)(b) in respect of payment of interest on time deposit taken from a cooperative society will continue to be available to a cooperative bank. Similarly, a primary agricultural society or a primary credit society or a cooperative land mortgage bank or a cooperative land development bank shall continue to enjoy the exemption under Section 194A(viia)(a), and will accordingly not be required to deduct tax at source from interest payment.
The definition of the term time deposits under Explanation 1 to Section 194A(3) has been amended to include recurring deposits within its scope. As a result, now for all banks, whether cooperative or commercial, interest paid on both time deposits and recurring deposits will attract the TDS provisions.
Many bank depositors avoided TDS from interest on bank fixed deposits by splitting their deposits amongst different branches of the same bank. This was on account of the current provision whereby the threshold limit of exemption from TDS is applicable to the interest credited or paid by every branch on an individual basis. With a view to curbing this practice, it is now proposed that TDS under Section 194A will be with reference to income credited or paid by the banks as a whole (in those cases where core banking solutions have been adopted by the concerned bank).
Interest paid on compensation amount awarded by the Motor Accident Claim Tribunal has been brought under the ambit of TDS. If the aggregate amount of such a payment during the financial year exceeds Rs. 50,000/-, there will be a TDS at the time of payment of the interest. Consequently, it follows that there would be no requirement to deduct tax at source at the time of credit of interest. All the above amendments are effective from 1st June 2015.
TDS from interest (other than interest on securities)-Section 194A
There are several amendments pertaining to TDS from interest.
Interest on fixed deposits with banks attracts TDS under Section 194A. Only exception to this was in respect of interest paid by co-operative banks to their members.
Now, Section 194A(3)(v) has been amended to expressly provide that payment of interest on time deposits by a cooperative bank to its members will not be exempt from withholding tax requirement. Therefore, with effect from 1st June 2015, when interest paid or credited in excess of the prescribed limit (which is presently Rs. 10,000/-), tax will have to be deducted at source by the cooperative bank.
The existing provisions that permit a depositor to furnish Form 15G/15H for non-deduction of tax at source from the interest wherever applicable, will apply to the interest on deposits with cooperative banks also.
The exemption from withholding tax under Section 194A(3)(viia)(b) in respect of payment of interest on time deposit taken from a cooperative society will continue to be available to a cooperative bank. Similarly, a primary agricultural society or a primary credit society or a cooperative land mortgage bank or a cooperative land development bank shall continue to enjoy the exemption under Section 194A(viia)(a), and will accordingly not be required to deduct tax at source from interest payment.
The definition of the term time deposits under Explanation 1 to Section 194A(3) has been amended to include recurring deposits within its scope. As a result, now for all banks, whether cooperative or commercial, interest paid on both time deposits and recurring deposits will attract the TDS provisions.
Many bank depositors avoided TDS from interest on bank fixed deposits by splitting their deposits amongst different branches of the same bank. This was on account of the current provision whereby the threshold limit of exemption from TDS is applicable to the interest credited or paid by every branch on an individual basis. With a view to curbing this practice, it is now proposed that TDS under Section 194A will be with reference to income credited or paid by the banks as a whole (in those cases where core banking solutions have been adopted by the concerned bank).
Interest paid on compensation amount awarded by the Motor Accident Claim Tribunal has been brought under the ambit of TDS. If the aggregate amount of such a payment during the financial year exceeds Rs. 50,000/-, there will be a TDS at the time of payment of the interest. Consequently, it follows that there would be no requirement to deduct tax at source at the time of credit of interest. All the above amendments are effective from 1st June 2015.
In my view, it has been wrongly stated at para 3.4 above that Co-operative Banks need not deduct tax at source on TIME DEPOSITS from a Co-operative Society due to exemption u/s 194A(3)(viia)(b). In this connection, kindly note that sub-clause (b) of clause (viia) of sub-section (3) of section 194A provides exemption ONLY for deposits OTHER THAN TIME DEPOSITS. Therefore, TDS is to be made for interest payments made by Co-operative Banks on TIME DEPOSITS.