TaxTMI 
TaxTMI 
Evolution of TDS on Interest on Securities : Clause 393(1)[Table: S.No. 5(i)] & 393(4)[Table: S.No. 6] of Income Tax Bill, 2025 Vs. Section 193 of Income Tax Act, 1961
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.... Tax Bill, 2025, there is a comprehensive attempt to consolidate, rationalize, and modernize TDS provisions. This commentary focuses on Clause 393(1)[Table: S.No. 5(i)] and Clause 393(4)[Table: S.No. 6] of the Income Tax Bill, 2025, providing a detailed analysis of their scope, operation, and implications, and compares them with the existing regime u/s 193 of the 1961 Act. Objective and Purpose The legislative intent behind TDS provisions on interest on securities is threefold: * Ensuring Advance Tax Collection: By mandating deduction at source, the law seeks to ensure that tax is collected at the earliest possible stage, reducing the risk of evasion or default. * Widening the Tax Base: TDS acts as a check on the reporting of in....
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....ing the practical application of the TDS requirement. II. Clause 393(4)[Table: S.No. 6] - Exemptions from TDS on Interest on Securities This sub-section provides a table of circumstances where no TDS is required, specifically referencing S.No. 5(i) of the main table. The exemptions are as follows: * Interest Payable on Specified Instruments: * National Development Bonds * Debentures issued by specified institutions, authorities, or persons as notified by the Central Government * Any security of the Central or State Government, other than: * 8% Savings (Taxable) Bonds, 2003 * 7.75% Savings (Taxable) Bonds, 2018 * Floating Rate Savings Bonds, 2020 (Taxable) * Any other security as notified by the Central Government * Inter....
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....erred by crediting to intermediary accounts. 4. Exemptions and Carve-Outs This area reveals both continuity and modernization: * Instrument-Based Exemptions: * Both laws exempt interest on National Development Bonds, certain notified debentures, and most government securities, except for specified taxable bonds (8%, 7.75%, Floating Rate, or as notified). * The 2025 Bill consolidates these exemptions into a more streamlined table, referencing the power of the Central Government to notify further exemptions, mirroring the approach in Section 193. * Entity-Based Exemptions: * Interest payable to LIC, GIC, specified insurers, and business trusts is exempt in both regimes, with wording modernized in the 2025 Bill for clarity and to r....
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....te procedural requirements). * The Bill provides for the Central Government's power to notify new exemptions, ensuring the law remains adaptable to changes in financial products and market realities. 7. Potential Ambiguities and Issues * Definition of "Interest on Securities": Both laws rely on the definition in the main Act, but as financial instruments evolve, the possibility of interpretative disputes remains (e.g., whether certain hybrid instruments qualify). * Overlap with Other Provisions: The Bill's structure attempts to minimize overlaps by clarifying precedence (e.g., if tax is deducted under one provision, it is not to be deducted again under another). * Notification Power: Both regimes vest significant discretion....
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....timely deduction and deposit of TDS provide clearer audit trails. Comparative Table: Key Features Feature Section 193 of the Income Tax Act, 1961 Clause 393(1)[Table: S.No. 5(i)] and Clause 393(4)[Table: S.No. 6] of the Income Tax Bill, 2025 Threshold Rs. 10,000 (recently increased) Rs. 10,000 Rate Rates in force Rates in force Exempt Instruments Detailed list, with periodic notifications Consolidated table, with notification power Exempt Entities LIC, GIC, insurers, business trusts, etc. Same, with modernized language Procedural Requirements Declarations, reporting, suspense account rule Declarations, reporting, suspense account rule Modernization Layered, historical, some obsolete references Co....