Income Tax Law • TDS on Investments • Updated October 2026
Section 193: TDS on Interest on Securities in India
Section 193 of the Income-tax Act, 1961 required tax deduction at source on interest on specified securities paid to a resident. For tax year 2026-27 onwards, the corresponding rules are principally contained in section 393(1), Table serial number 5(i), of the Income-tax Act, 2025, with applicable exemptions under section 393(4).
What is interest on securities?
Interest on securities generally means interest arising from instruments such as government securities, bonds and debentures, as distinguished from ordinary bank-deposit interest. For TDS purposes, the exact character of the instrument, the recipient's residence and the applicable statutory exception matter. Interest other than interest on securities is generally dealt with under section 194A of the 1961 Act, rather than section 193.
Who deducts? The person responsible for paying interest on securities to a resident must deduct tax where the statutory conditions are satisfied. Payments to non-residents are governed by separate withholding provisions, including section 195 of the 1961 Act for the relevant earlier period; do not apply the resident-payee rule automatically.
TDS rate, Rs. 10,000 threshold and deduction timing
| Issue | Practical rule |
|---|---|
| Ordinary TDS rate | Generally 10% for covered interest on securities paid to residents, subject to applicable statutory provisions and valid lower/nil deduction arrangements. |
| General threshold | For financial year 2025-26, section 193 was amended to provide a Rs. 10,000 aggregate threshold during the financial year. Check the corresponding 2025 Act threshold for tax year 2026-27. |
| Time of deduction | At the earlier of credit to the payee's account or actual payment, including credit to an interest-payable or suspense account. |
| PAN and special rates | Failure to furnish PAN may attract higher withholding under the relevant law; exemptions, certificates and specific payee rules must be checked separately. |
The threshold determines whether deduction is required; it is not a tax-free allowance against the recipient's final taxable income. A payer should monitor the aggregate interest for the financial or tax year rather than each instalment in isolation.
When is TDS not required?
The 1961 Act contained a detailed proviso with exclusions for particular securities and recipients. The list below preserves the principal categories from the historical provision, while recognising that eligibility must be verified against the law applicable to the payment date.
- Specified government securities: interest on certain Central or State Government securities, subject to exceptions for taxable savings bonds, including 8% Savings (Taxable) Bonds, 2003; 7.75% Savings (Taxable) Bonds, 2018; Floating Rate Savings Bonds, 2020 (Taxable); and any other notified securities.
- Historical government instruments: specified National Defence Bonds and Loans, National Development Bonds, 7-Year National Savings Certificates (IV Issue), and specified Gold Bonds, subject to the individual conditions set out in the statute.
- Notified debentures: interest on eligible debentures notified by the Central Government.
- Qualifying public-company debentures: under the 1961 Act, interest paid by account-payee cheque to a resident individual or HUF on qualifying debentures of a widely held company was excluded where the applicable annual amount did not exceed Rs. 10,000 after the 2025 amendment.
- Specified institutional recipients: certain securities beneficially owned by LIC, GIC, specified general insurers and other insurers; and certain business-trust payments, subject to the governing provision.
Important change: older copies of section 193 sometimes show a blanket exemption for listed dematerialised securities under clause (ix). That exemption was removed by legislative amendment effective from 1 April 2023. Do not rely on an outdated copy of the section to avoid TDS on listed debenture interest.
Under the Income-tax Act, 2025, relevant exclusions are consolidated in section 393(4), Table serial number 6. Consult the enacted text and notifications rather than assuming every historical exception continues unchanged.
Section 193 of the 1961 Act and section 393 of the 2025 Act
| 1961 Act | 2025 Act |
|---|---|
| Section 193: Interest on securities | Section 393(1), Table serial number 5(i): TDS on interest on securities |
| Proviso listing securities and recipients excluded from deduction | Section 393(4), Table serial number 6: relevant exclusions |
| Section 194A: Interest other than interest on securities | Section 393(1), Table serial number 5(ii) and (iii), as applicable |
The 2025 Act reorganises withholding provisions into tables. This is a legislative cross-reference, not a statement that every exception, definition or compliance form remains identical.
Practical examples
Example 1: Interest exceeds the threshold
A resident investor receives Rs. 18,000 interest during a year on a security subject to the ordinary 10% TDS rule and without any applicable exclusion. Illustratively, the payer deducts Rs. 1,800, subject to the law governing that year. The investor reports the gross interest as applicable and claims credit for TDS reflected in tax records.
Example 2: Interest credited before payment
A company credits Rs. 24,000 interest to an interest-payable account on 28 March and transfers the amount to the holder on 15 April. If the credit is the first relevant event and the payment is covered, the deduction obligation ordinarily arises at credit, not at the later transfer.
Example 3: Government security
An investor receives interest on a government security. The payer must identify whether it is an exempt government instrument or one of the taxable savings bonds specifically carved out from the exemption. The description "government bond" alone does not establish nil TDS.
Checklist for deductors and investors
- Confirm the payee's residential status and the nature of the security.
- Determine the applicable tax year, threshold, rate and exemption under the correct Act.
- Obtain and validate PAN and any relevant declaration or lower/nil deduction certificate.
- Track cumulative interest and deduct at the earlier of credit or payment.
- Deposit TDS, file the prescribed TDS statement and issue the applicable certificate within the relevant deadlines.
- Reconcile the deductee's Form 26AS/AIS or corresponding tax records and correct any reporting errors.
Frequently asked questions
Is interest on listed debentures automatically exempt from TDS?
No. An older exemption for listed dematerialised securities was withdrawn. Check the law and exclusions applicable to the payment.
Is the Rs. 10,000 threshold a tax exemption?
No. It is a withholding threshold, not necessarily an exemption from income tax on the interest.
Does section 193 apply to non-resident bondholders?
The resident-payee provision does not by itself determine withholding for non-residents. Separate provisions and any applicable treaty must be considered.
Where is section 193 located in the 2025 Act?
Its principal successor is section 393(1), Table serial number 5(i); relevant exclusions are in section 393(4), Table serial number 6.
Official legislation and guidance
- Income-tax Act, 2025 (official Act PDF)
- Official section-mapping navigator
- Income Tax Department: TDS on interest and other payments
- Income Tax Department: TDS rates for assessment year 2026-27
- Finance Act, 2025: official highlights of revised thresholds
This article provides general legal information. The enacted law, rules, notifications and facts of each payment control the actual withholding obligation.