Banks exempted from deducting tax at source from interest paid on deposits under clause (vii) of sub-section (3) from 1-4-1970 - Whether tax already deducted and paid into Government account could be refunded directly by banks

Banks Exempt from Tax Deduction on Deposit Interest u/s 194A(3)(vii) Since April 1, 1970.

Banks are exempt from deducting tax at source from interest paid on deposits under clause (vii) of sub-section (3) of section 194A, effective from April 1, 1970. This applies to deposits with banking companies under the Banking Regulation Act, 1949, and co-operative societies engaged in banking. If tax has already been deducted and paid to the government, banks cannot directly refund it to depositors. Instead, depositors must seek refunds through their Income-tax Officers. If tax was deducted but not yet paid to the government, banks can reverse the deduction entry to nullify it.