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of <h1>Tax Deduction u/s 194A: Clarification on Interest Credited to 'Interest Payable' or 'Liability for Expense' Accounts.</h1> Section 194A of the Income Tax Act, 1961 mandates that entities, excluding individuals and Hindu Undivided Families (HUF), deduct income tax at source from interest payments to residents, excluding 'Interest on Securities'. This deduction should occur at the time of crediting the interest to the payee's account or during payment, whichever is earlier. The issue addressed is whether tax deduction is required when interest is credited to an 'Interest Payable Account' or 'Liability for Expense Account' under the mercantile accounting system. The directive clarifies that tax deduction is necessary only when the interest is credited to the payee's personal account or paid.
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