Section 193 of Income Tax Act

Section 193 requires the deduction of TDS on interest generated from securities, such as bonds, debentures, government securities and other debt instruments. The deduction should apply whenever the interest amount or total interest exceeds ₹10,000 in a financial year. Certain debt instruments carry an exemption from Section 193, and no tax is deducted in advance.

Under Section 193, the person responsible for paying the interest is required to deduct tax at the prescribed rates and credit the amount to the government within the due date.

Also Read: All About TDS in India

Under Section 193, a flat 10% TDS rate is applicable to all corporate and government-issued securities listed under Section 2(28B). However, for bondholders who have failed to furnish their PAN, the deductors have to deduct the highest of the following rates:

• 20% in case of not submitting PAN or having an inoperative PAN. Anyone who hasn’t linked their Aadhaar number to PAN is liable for a 20% TDS deduction.
• At the rate stated in the relevant provision of the act.
• At the currently prevailing rate or rates as prescribed by the latest Finance Act.

Also Read: TDS Rules, Rates & Filing Process

Any person, whether resident or non-resident, responsible for paying interest on securities owned by an Indian resident, is also responsible for deducting TDS before making payment. The bond issuer, whether corporations, local authorities, state, or central government, is the one that pays the interest on securities.

The person responsible for paying interest must deduct TDS at the time of payment or when crediting the amount to the investor’s account. After deducting the TDS, the amount must be deposited with the government within the following due dates to avoid financial penalties:

Every deductor (bond issuer) must furnish a TDS certificate to the deductee (investor) for tax deductions on any payments other than salary. The following are the due dates for TDS certificate issuance under Section 194A:

After deducting TDS under Sec 193 of the Income Tax Act, deductors must also furnish TDS details to the government by filing quarterly returns.

As per Section 201, the following penalties are applicable if the deductor fails to deduct or deposit TDS within the respective due dates:

• Penalty for Delay in Deducting TDS: For delay in deducting TDS, interest is charged at 1% per month or part of the month when interest was outstanding. It’s payable from the date when TDS was to be deducted to the date it’s actually deducted.
• Penalty for Delay in Depositing TDS: For failing to deposit the TDS amount with the government, interest is charged at 1.5% per month or part of the month while tax is unpaid. The interest is calculated from the date of deduction to the actual payment.

Also Read: How to Make TDS Payment

No TDS is deductible under Section 193 for interest from the following securities:

• Interest Payable to Insurance Companies: Interest payable to LIC (Life Insurance Corporation of India) and GIC (General Insurance Corporation of India) and their subsidiaries are exempt from TDS deductions. Interest payable to any other insurer is also exempt.
• Self Declaration Under 15G/15H: Any person whose income is below the basic exemption limit can furnish a declaration via Form 15G or Form 15H to the bond issuer to avoid TDS deductions. From April 1st 2026, the Form 121 has replaced both forms.
• Special Government-Issued Securities: Interest payable on 4.025% National Defence Bond 1972, 4.025% National Defence Loan 1968, National Development Bonds, and 7-year National Savings Certificate (IV) are exempted from TDS deductions.
• Specific Gold Bonds: 6.5% gold bonds and 7% gold bonds held by a resident individual are eligible for TDS exemption. The resident’s holdings must not have been above ₹10,000 at any point in the tenure.
• Central and State Government Securities: Interest payable on securities issued by the Central Government or any state government is exempt, provided that the interest amount is not more than ₹10,000 in a financial year.
• Specific Debentures with Public Interest: Debentures issued to individuals and HUFs (Hindu Undivided Family) with sufficient public interest are also exempt if the interest amount is ₹10,000 or lower.

In FY2025-26, the Indian Government has increased the exemption limit for TDS deduction from ₹5000 to ₹10,000 in a financial year. Understanding the provisions and meaning of Section 193 of the Income Tax Act lets you better manage your investments and tax planning. If you don’t have a taxable income, you can submit a declaration via Form 121 to gain exemption from TDS deductions.

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