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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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