Section 194A

Section 194A — the law in short

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

• CIT v Ghanshyam (HUF) Supreme CourtHelps department
  The court enhanced my acquisition compensation with interest. Which year is it taxed, and is the interest capital?
  Interest awarded under s.28 of the Land Acquisition Act, 1894 is part of the amount of compensation; interest under s.34 is not, because it is only compensation for delay in paying a sum already determined. The additional amount under s.23(1A) and the solatium under s.23(2) are likewise part of enhanced compensation, and the whole of it — including s.28 interest — is taxed under s.45(5) in the year of receipt, even where the claimant has withdrawn it against security while the Revenue's or the State's appeal is pending.
• Ghaziabad Development Authority v Union of India High CourtCuts both ways
  I failed to deduct TDS and the department has raised a demand on me for the tax itself plus surcharge under section 201. Can it do that?
  No, not on this judgment. The Allahabad High Court held that section 201 by itself imposes only interest under sub-section (1A) and penalty under sub-section (1); it carries no provision letting an income-tax authority demand the amount of TDS, or the tax, from a person who failed to deduct, unless the case answers section 201(2), where tax was deducted but not paid over. Surcharge on a TDS amount was struck down as well, tax deductible at source being different from tax on total income. What survives is interest under section 201(1A), from the date the tax was deductible to the date the tax was actually paid.
• Thomas George Muthoot v CIT High CourtHelps departmentHigh Courts differ
  My payee has already paid the tax on the interest I paid him without deducting TDS. Can I use the second proviso to s.40(a)(ia) for an earlier year?
  Not in Kerala. The Kerala High Court held that the second proviso to s.40(a)(ia), inserted by the Finance Act 2012 with effect from 1 April 2013, is prospective only, because it confers an additional benefit rather than removing an unintended hardship, and so cannot rescue a disallowance for an earlier assessment year. The Court also held that the fact that the recipient has since paid the tax does not undo the disallowance, Hindustan Coca Cola being confined to s.201(1).
• Bhura Mal Raj Mal v CIT High CourtHelps taxpayer
  The officer has passed a s.154 order shifting my TDS credit to the next year because the payer's accounting year is different from mine. Can he do that by rectification?
  No. The Rajasthan High Court held that the credit belongs to the year in which the income is assessed in the recipient's hands, not the year fixed by the payer's accounting year or the date on the certificate, and in any event the point was at best debatable, so s.154 could not be used at all. The consequential withdrawal of s.214 interest and charging of s.215 interest also fell.
• ITO (TDS) v Sashwat Energy P Ltd ITATHelps taxpayerNo later treatment found
  My deductee has returned the income and paid the tax, and I have filed Form 26A. I know the s.201(1) demand goes — but for how long does s.201(1A) interest run against me?
  To the date the resident payee furnished his return of income, not to the date you eventually pay. The Mumbai Bench stated the rule expressly: where the payer is not deemed to be an assessee in default under s.201(1) because the resident payee paid the tax, interest under s.201(1A)(i) is payable from the date on which the tax was deductible to the date of furnishing of the return of income by that resident payee. The s.201(1) demand itself was set aside subject to verification.
• Meridian Telesoft Ltd v ACIT ITATHelps taxpayerJudgment not reachable
  What proof do I need that my payee declared the income and paid tax, to get the disallowance deleted?
  A chartered accountant's certificate showing the payee included the amount in its return and paid tax on it was accepted as sufficient. Once the payer is not deemed an assessee in default under the first proviso to s.201(1), s.40(a)(ia) is deemed to have been complied with and the disallowance goes.
• Statutory position — s.194LA: TDS on compensation for compulsory acquisition of immovable property, and the RFCTLARR s.96 carve-out CBDT Circulars & InstructionsCuts both ways
  The land acquisition officer has deducted ten per cent from my compensation cheque. When is s.194LA actually attracted, what is the threshold now, and does the RFCTLARR exemption stop the deduction?
  Section 194LA obliges any person paying a resident compensation, enhanced compensation, consideration or enhanced consideration on account of compulsory acquisition of immovable property, under any law for the time being in force, to deduct ten per cent at the time of payment. Three things cut it down: the section does not touch agricultural land at all, because 'immovable property' is defined to exclude it; the first proviso stops deduction where the payment or the aggregate of payments to that resident in the financial year does not exceed five lakh rupees, that figure having replaced 'two lakh and fifty thousand' by Act No. 7 of 2025 with effect from 1 April 2025; and the second proviso stops deduction altogether where the payment is made in respect of any award or agreement exempted from levy of income-tax under s.96 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013.
• 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.197: the Assessing Officer may certify a lower rate, or nil, for a listed section, but only on the payee's application and only for a period of the previous year — the 1961 Act position, for deductions up to 31 March 2026 CBDT Circulars & InstructionsCuts both ways
  My money is stuck. Every invoice I raise has tax deducted at the full rate, my actual tax for the year is far less than the deductions, and I only get it back a year later when the refund comes. Somebody told me to apply for a lower-deduction certificate under section 197. What does section 197 actually say — which payments does it cover, what does the Assessing Officer have to be satisfied about, what form do I file, and can the certificate be backdated to cover the deductions already made?
  Section 197(1) lets the payee apply to the Assessing Officer for a certificate that the payer may deduct at a lower rate, or not at all. It is not open-ended: it works only for the sections named in it, and the Assessing Officer must be satisfied that “the total income of the recipient justifies” the lower rate. The list is sections 192, 193, 194, 194A, 194C, 194D, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194M, 194-O, 194Q and 195 — 194LBA was added by Act No. 8 of 2023 with effect from 1 April 2023 and 194Q by Act No. 15 of 2024 with effect from 1 October 2024. Section 197(2) then binds the payer: once a certificate is given, he deducts at the certified rate, or nothing, until the Assessing Officer cancels it. Section 197(2A) is the rule-making power, and the rules made under it are rule 28 (application in Form No. 13, filed electronically), rule 28AA (how the rate is worked out and how long the certificate lasts) and rule 28AB (a no-deduction certificate for trusts and other section 139(4C) filers). Nothing in the section or the rules confers a power to backdate a certificate, and in substance it operates forward: rule 28AA(4) sends it to the named deductor, who cannot un-deduct months already past. From 1 April 2026 this machinery is gone — the Income-tax Act, 1961 was repealed by section 536 of the Income-tax Act, 2025 and the successor is section 395 of the 2025 Act, applied for in Form No. 128 under rule 213 of the Income-tax Rules, 2026, and from the same date section 395(6) lets that application go to a prescribed income-tax authority instead of the Assessing Officer.

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.