Section 193 of ITA, 1961 : Section 193: Interest On Securities

Explanation using Example

Imagine a scenario where a company, XYZ Corp, issues debentures to the public, and Mr. John, a resident of India, holds some of these debentures. XYZ Corp is about to make an interest payment of ₹4,000 to Mr. John for the current financial year. As per Section 193 of the Income-tax Act, 1961, the company is responsible for deducting tax at source on the interest payable to Mr. John.

However, considering the provisions of the Act, since the interest payment to Mr. John does not exceed ₹5,000 and assuming XYZ Corp pays the interest via an account payee cheque, the company is not required to deduct tax at source on this interest payment to Mr. John. This is because the amount falls within the exemption limit provided under clause (v) of the Act for individuals or Hindu undivided families where the interest payment does not exceed ₹5,000 and is paid by an account payee cheque.