TDS on Interest u/s 194A: Threshold Limit Increased to Rs. 40,000 for Banks, Post Office, etc.

The threshold limit for deduction of TDS under Section 194A of the Income Tax Act, 1961, in respect of interest payments by banks/ post offices on term/ fixed/ recurring deposits, has been increased from Rs. 10,000 to Rs. 40,000, applicable from FY 2019-20/ AY 2020-21 and onwards, as proposed by Finance Minister Sh Piyush Goyal while presenting the Budget 2019.

TDS threshold for deduction of tax on Intersst u/s 194A has been increased from Rs. 10,000 to Rs. 40,000 to provide relief/ benefit to small taxpayers (depositors, housewives, senior citizens, pensioners, etc.) who are dependent on interest income from smalls savings deposited with banks/ post offices.

Section 194A of the Income Tax Act, 1961 has been amended vide Section 9 of the Finance Act 2019, as under:

“In section 194A of the Income-tax Act, in sub-section (3), in clause (i), for the words “ten thousand” wherever they occur, the words “forty thousand” shall be substituted.”

Accordingly, no tax is required to be deducted u/s 194A if the aggregate amount of interest during the financial year does not exceed the threshold limit of Rs. 5,000. However, this limit stands increased to Rs. 40,000 where the interest is paid/ payable by a ‘banking company or co-operative society carrying on banking business or post office’ from FY 2019-20/ AY 2020-21.

Revised Threshold Limits for no TDS u/s 194A

Applicable threshold limits for no TDS u/s 194A have been revised for different cases. No TDS is required to be deducted u/s 194A if aggregate amount of interest credited or paid to the payee in respect of time deposit (including recurring deposits repayable on the expiry of fixed periods) during the financial year doesn’t exceed the following limit:

PayerThreshold limit if Payee is
Senior CitizenOthers
Banking Company, Post Office, Co-operative Society engaged in banking business50,00040,000

It may be noted that above threshold limit shall not be considered on per Branch basis, where the concerned banking company/ co-operative society/ public company has adopted CBS System.

Related Posts:

No TDS u/s 194A for Income upto 50,000 in the case of Senior Citizens: CBDT Clarification


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