Section 194A(3)(v)

Section 194A(3)(v) — the law in short

What the courts have decided on section 194A(3)(v), in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• Citizen Credit Co-operative Bank Ltd v ITO (TDS Ward), Mumbai High CourtHelps taxpayerNo later treatment found
  We are a co-operative bank. The TDS officer says we should have deducted tax under s.194A on fixed deposit interest paid to co-operative housing societies that are not our members, and has treated us as an assessee in default. Is he right?
  No, on the Bombay High Court's reading. Clause (v) of s.194A(3) has two limbs, and the words 'other than a co-operative bank' appear only in the first limb, which deals with interest paid by a society to its members; the second limb — interest 'credited or paid by a co-operative society to any other co-operative society' — carries no such exclusion, so a co-operative bank, which remains a co-operative society, is not obliged to deduct tax on interest paid to non-member co-operative societies. Paragraph 42.7 of CBDT Circular No. 19 of 2015 says the same thing in terms.
• PCIT v Totagars Co-operative Sale Society High CourtHelps department
  My society earns interest on deposits with a co-operative bank. Is it deductible under 80P(2)(d)?
  On the Karnataka view, no. Interest on idle or surplus funds keeps its character as income from other sources whether the depositee is a scheduled bank or a co-operative bank, and clause (d) speaks only of 'any other co-operative society' — the words 'co-operative banks' are absent from it.
• Coimbatore District Central Co-operative Bank Ltd v ITO (TDS) High CourtHelps taxpayer
  The department has raised s.201 demands on our co-operative bank for not deducting tax on time deposit interest paid to members in years before June 2015. Does the Finance Act 2015 amendment to s.194A(3)(v) apply to those years?
  No. The Madras High Court held that the words 'other than a co-operative bank' were inserted in s.194A(3)(v) by the Finance Act 2015 with prospective effect from 1 June 2015, and that an amendment is prospective unless made retrospective by express language or necessary implication. For interest paid or credited to members before that date the exemption in s.194A(3)(v) was available, and the Court also held that no State or central enactment draws a distinction between a co-operative bank and a co-operative society carrying on banking business.
• Statutory position — s.194A: tax on interest other than interest on securities, with the threshold at ₹50,000 for a bank, co-operative bank or post office, ₹1,00,000 for a senior citizen and ₹10,000 in any other case — the 1961 Act position from 1 April 2025 to 31 March 2026 CBDT Circulars & InstructionsCuts both ways
  My bank has deducted tax on my fixed deposit interest and I was told the limit had gone up. My father is a senior citizen and his bank deducted too. There is also a loan I took from a friend on which I pay interest, and a co-operative society that pays me interest on a deposit. Who exactly has to deduct under section 194A, on what amount, and what are the limits as they stand now?
  Section 194A requires any person who is not an individual or a Hindu undivided family, and who pays a resident interest other than interest on securities, to deduct tax at the rates in force at the time of credit or payment, whichever is earlier. An individual or HUF is drawn in only by the proviso to sub-section (1), and only if total sales, gross receipts or turnover exceeded one crore rupees in business or fifty lakh rupees in profession in the preceding financial year. Section 194A(3)(i) sets the thresholds. From 1 April 2025 they are fifty thousand rupees where the payer is a banking company, a co-operative society carrying on banking business or a post office deposit scheme, one lakh rupees where the payee is a senior citizen, and ten thousand rupees in any other case — each figure substituted by Act No. 7 of 2025, the Finance Act, 2025. Section 194A(3) also carries the exclusions: interest paid to a banking company, a financial corporation, the Life Insurance Corporation, the Unit Trust of India or an insurer under clause (iii); interest paid by a firm to its partner under clause (iv); the co-operative society exemptions in clauses (v) and (viia), which since 1 April 2020 are switched off only where both conditions in the proviso are met — the society's turnover exceeded fifty crore rupees in the preceding financial year and the interest to that payee crossed one lakh rupees for a senior citizen or fifty thousand rupees for anyone else; and the two Motor Accidents Claims Tribunal limbs in clauses (ix) and (ixa), where interest credited is never liable and interest paid is liable only above fifty thousand rupees in the financial year — a figure the Finance Act, 2025 did not move. Section 197A(1A) and (1C) let a payee stop the deduction by declaration — Form No. 15G, or Form No. 15H for a resident individual aged sixty or more, both prescribed by rule 29C. From 1 April 2026 the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025; the successor is section 393(1) of the 2025 Act, whose Table carries the same three figures.
• Statutory position — s.194A(3)(v) and (viia): when a co-operative society or a co-operative bank must deduct tax on interest CBDT Circulars & InstructionsCuts both ways
  Our co-operative society pays interest to members, to other co-operative societies and to outsiders. Which of these payments carry a TDS obligation under s.194A?
  Clause (v) of s.194A(3) exempts two things and must be read as two limbs: income credited or paid by a co-operative society, other than a co-operative bank, to a member thereof; and income credited or paid by a co-operative society to any other co-operative society. The words 'other than a co-operative bank' were inserted in the first limb by the Finance Act 2015 with effect from 1 June 2015, so from that date a co-operative bank must deduct tax on interest on time deposits of its members; the second limb was not amended and carries no exclusion of a co-operative bank, so interest paid by any co-operative society, including a co-operative bank, to another co-operative society remains outside sub-section (1).

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.