Union Budget 2025-26 (Full) + Finance Bill, 2025

Section 194A – Interest other than interest on securities

Sub-section (1) of section 194A of the Act requires that any person, not being an individual or a Hindu undivided family, responsible for paying to a resident any interest income other than interest income on securities, shall deduct income-tax thereon at the rates in force.

2. Sub-section (3) of section 194A of the Act states that tax may not be required to be deducted when payment of interest income is by a payer of a specific nature and does not exceed a certain specified amount. These thresholds are higher in the case of a senior citizen being the payee, as given in the third proviso to clause (i) of sub-section (3). As per proviso to sub-section (3) of section 194A of the Act, a co-operative society as referred to in clause (v) and clause (viia) of sub-section (3) shall be liable to deduct income-tax at source when the amount of interest income during the financial year is more than Rs. 50,000/- in case of payee being a senior citizen and Rs. 40,000/- in any other case.

3. It is proposed to increase the threshold for requirement to deduct tax at source in section 194A as below –

S. No	Payer	Current threshold to deduct TDS	Proposed threshold to deduct TDS	Current threshold to deduct TDS when payee is senior citizen	Proposed threshold to deduct TDS when payee is senior citizen
1.	A banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act)	Rs. 40,000/-	Rs. 50,000/-	Rs. 50,000/-	Rs. 1,00,000/-
2.	A co-operative society engaged in carrying on the business of banking	Rs. 40,000/-	Rs. 50,000/-	Rs. 50,000/-	Rs. 1,00,000/-
3.	on any deposit with post office under any scheme framed by the Central Government and notified by it in this behalf	Rs. 40,000/-	Rs. 50,000/-	Rs. 50,000/-	Rs. 1,00,000/-
4.	Any other case	Rs. 5,000/-	Rs. 10,000/-	Rs. 5,000/-	Rs. 10,000/-
5.	A cooperative society referred to in clause (v) and clause (viia) of sub-section (3) of section 194A	Rs. 40,000/-	Rs. 50,000/-	Rs. 50,000/-	Rs. 1,00,000/-

4. These amendments will take effect from the 1st day of April 2025.

[Clause 53]

 

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Full Text:

Union Budget 2025-26 (Full) + Finance Bill, 2025

TDS on interest thresholds increased, raising exemption limits for banks, cooperatives and post office deposits next fiscal year. Amendments raise thresholds under Section 194A for deduction of tax at source on interest other than interest on securities, increasing payer-specific limits for banks, cooperative banks, certain cooperative societies and notified post office deposits from forty thousand to fifty thousand and raising the baseline for other payers from five thousand to ten thousand; senior citizen thresholds for the specified payer categories are increased to one hundred thousand and to ten thousand for other payers. The revised thresholds take effect from the first day of the fiscal year beginning April 1, 2025.