The provisions relating to TDS on interest other than interest on securities have been restructured under the Income-tax Act, 2025. The earlier Section 194A of the Income-tax Act, 1961 is now covered under Section 393(1) [Table: Sl. No. 5(ii).D(a), 5(ii).D(b) and 5(iii)], effective from 1st April, 2026.
This restructuring introduces a classification based on the category of the deductee, particularly distinguishing between senior citizens, other individuals, and general cases, while retaining the core provisions relating to deduction of tax at source.
Quick Reference – Section Mapping & Reporting
- New Section (IT Act 2025): Section 393(1)
- Table Reference:
- Sl. No. 5(ii).D(a) – Senior Citizens
- Sl. No. 5(ii).D(b) – Others
- Sl. No. 5(iii) – Other than interest on securities
- Nature of Payment: Income by way of interest other than interest on securities
- Earlier Section (IT Act 1961): Section 194A
- Return Form: 26Q
- Code (for return filing):
- 1020 – Senior Citizen
- 1021 – Other than Senior Citizen
- 1022 – Other than interest on securities
Applicability of TDS on Interest
TDS is required to be deducted on income by way of interest other than interest on securities. This includes interest on fixed deposits, unsecured loans, and similar financial arrangements. Interest on securities is not covered under this provision and is governed separately.
Deductor and Deductee
- Deductor:
- Individuals and HUFs liable for tax audit under Section 63 in the preceding year
- All other entities such as firms, companies, AOPs, BOIs
- Deductee:
- Resident recipient of interest income
- In case of non-resident, provisions of Section 195 shall apply
Time of Deduction
TDS shall be deducted at the earlier of the following events:
- At the time of credit of interest to the account of the payee
- At the time of payment by cash, cheque, draft or any other mode
Rate of TDS
- TDS is deducted at a flat rate of 10% on interest income
- In cases where PAN is not furnished, tax shall be deducted at a higher rate as per applicable provisions
Threshold Limits (Category-wise)
TDS applicability depends on the category of the deductee:
Senior Citizens
- Threshold limit: ₹1,00,000
Other than Senior Citizens
- Threshold limit: ₹50,000
General Cases
- Threshold limit: ₹10,000
Meaning of Interest
Interest means interest payable in any manner in respect of any money borrowed or debt incurred. It also includes:
- Deposits or claims
- Service fees or charges in respect of borrowed money
- Charges relating to credit facilities, whether utilized or not
Cases Where TDS is Not Required
TDS shall not be deducted in the following cases:
- Interest paid to banking companies, financial corporations, LIC, UTI, insurance companies
- Interest paid by a firm to its partner
- Interest on deposits with specified co-operative institutions
- Interest paid by co-operative societies to members or other co-operative societies
- Interest on savings bank accounts
- Interest on Post Office schemes, NSC, Kisan Vikas Patra
- Interest paid by Central Government
- Chit dividend (not treated as interest)
- Interest on delayed payment of purchase bills
- Where Form 121 is furnished
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