[Sec 193] Deduction of Tax at source from interest on securities

Any person responsible for paying any interest n securities to a resident is required to deduct income tax at source at the rates in force.

Time of Deduction

Tax has to be deducted at source at the time of payment or at the time of credit to the account of payee or transfer to interest payable account or suspense account, wchichever comes earlier. However, tax cannot be deducted until identity of the person in whose hands it is includible as income can be ascertained-Industries Development Bank of India vs ITO [2006] 10 SOT 497 / 104 TTJ 230 (MUM)

Securities Interest on which is not subject to tax deduction

1. Debentures issued by any institution or authority or any public sector company or co-operative society (including a co-operative land mortgage bank or a co-operative land development bank) notified by the Central Government.
2. any security of the Central /state Government [However, from 01 June 2007 interest exceeding Rs. 10,000/- payable during a financial year on 8% Savings (Taxable) Bonds 2003 (Popularly known as relief bonds) will be subject tot the tax deduction at source irrespective of date of investment
3. Securities beneficially owned by the life insurance corporation of India or the General Insurance Corporation of India or to any of the four companies formed by virtue of the schemes framed under section 16(1) of the General Insurance Business (Nationalization) Act 1972 or any other insurer
4. with effect from 01 June 2008 any listed demat security