TDS
TDS on Interest (Other Than Securities) — Section 194A
Section 194A requires 10% TDS on interest paid to a resident once it crosses the threshold for the payer type — ₹50,000/year from banks or post offices (₹1,00,000 for senior citizens), or ₹10,000/year from any other payer.
Section 194A covers interest on things like fixed and recurring deposits, and interest on loans — anything other than interest on securities, which is covered separately. It applies whenever a resident pays or credits interest to another resident above the applicable threshold.
Savings account interest is exempt from this section regardless of amount (though it's still taxable income in the recipient's hands) — this section is about term deposits, loans, and similar interest-bearing arrangements.
From FY 2026-27, this is Section 393(1), Table 1, Sl. 5(ii) (bank/post office interest) or Sl. 5(iii) (other interest) under the Income-tax Act, 2025, filed against payment code 1020, 1021, or 1022 depending on the category.
Worked example
On a ₹60,000.00 payment at 10%, TDS is ₹6,000.00 and the net payment is ₹54,000.00. ₹60,000 in FD interest paid by a bank to a non-senior-citizen depositor in a year: since it exceeds the ₹50,000 bank threshold, 10% TDS applies to the full amount.
Frequently asked questions
Does this apply to interest my business pays on a loan from a director or relative?
Yes — as a non-bank payer, if annual interest to that one lender exceeds ₹10,000, 10% TDS applies. This is a much lower threshold than the ₹50,000 banks get.
Is savings account interest covered?
No — savings account interest is exempt from TDS under this section regardless of amount, though it remains taxable income for the recipient.
What threshold applies if the lender is a senior citizen?
₹1,00,000/year from banks or post offices, instead of the standard ₹50,000 — this higher threshold only applies to bank/post office interest, not to interest from other payers.