What are the Section 194A thresholds for FY 2025-26?

Finance Act 2025 raised three thresholds, effective 1 April 2025: (i) senior citizens (60+) on bank / co-op bank / post office interest — ₹1,00,000 per FY per bank (up from ₹50k); (ii) non-senior individuals on same — ₹50,000 per FY per bank (up from ₹40k); (iii) interest from any other payer (NBFC, corporate unsecured loan, cooperative society debentures) — ₹10,000 per FY per payee (up from ₹5k).

Is TDS deducted on savings account interest?

No. Section 194A explicitly excludes interest on savings accounts maintained with banks, cooperative banks, or post offices. Savings interest is taxable in your hands (declared in the ITR) but can be reduced by deduction under Section 80TTA (₹10,000 cap for non-seniors) or Section 80TTB (₹50,000 cap for seniors, covers both savings + FD).

Does the bank aggregate FDs across branches for threshold testing?

Yes. All scheduled commercial banks operate Core Banking Solutions (CBS) — the threshold (₹50,000 or ₹1,00,000) is computed by aggregating interest across ALL fixed + recurring deposits the depositor holds with that bank, across all branches. The threshold is per-bank-per-PAN, not per-FD or per-branch. Across two different banks, each bank tests its own aggregate independently — totals are not summed.

What happens if PAN is not provided to the deductor?

Section 206AA invokes a penal rate of 20% (instead of the standard 10%). For banks, providing PAN at account opening is part of the standard KYC — so 206AA rarely triggers. For unsecured-loan scenarios where the payer hasn't collected the payee's PAN, the payer must withhold 20% on interest exceeding ₹10,000.

Does Section 194A apply to interest paid to NRIs?

No. 194A applies only to interest paid to residents. Interest paid to NRIs (including NRO account interest) is governed by Section 195 — has no minimum threshold, requires a TAN, and applies higher rates (typically 30%+ surcharge+cess, subject to DTAA relief). For NRE / FCNR(B) interest paid by banks to NRIs, no TDS applies because that interest is exempt from tax in India under Section 10(4)/10(4B).

Are recurring deposits (RDs) subject to TDS under 194A?

Yes. RD interest is aggregated with FD interest by the bank's CBS for threshold testing. Earlier carve-out for post office RDs / small-savings products has been progressively removed; RD interest from banks + post office is now firmly within 194A.

How is interest paid by a firm to its partner treated?

From FY 2025-26, partner remuneration (including interest on partner capital) is governed by **Section 194T** — not 194A. The firm / LLP deducts 10% TDS on aggregate payments (salary + interest + bonus + commission) to a partner exceeding ₹20,000 per FY. Section 194A continues to apply only to non-partner interest payments.

Section 194A — TDS on Interest Other Than Securities (FY 2025-26)

Q: What is the difference between Form 15G and Form 15H?

Form 15G — for individuals below 60 years; self-declaration that total income is below the basic exemption limit (so estimated tax liability is nil). Form 15H — for senior citizens (60+); self-declaration that estimated final tax liability for the FY is nil (no upper-income test like 15G). Both are submitted to the deductor (typically the bank) at the start of the FY or before the first interest payout; the deductor reports them to the IT department in Form 26Q.

What 194A covers

Section 194A is the primary TDS provision for interest income other than interest on securities (which is covered separately under Section 193). It captures the most common forms of passive interest income for Indian individuals + businesses:

Bank + cooperative bank + post office fixed deposit (FD) interest
Recurring deposit (RD) interest
Interest on unsecured loans paid by companies / firms / LLPs to lenders
NBFC interest payouts
Cooperative society interest on debentures

For the cross-section TDS rate reference, see the TDS Rate Chart FY 2025-26. For the new partner-remuneration TDS section that replaces 194A treatment for firm-to-partner interest, see Section 194T.

Who must deduct

The 194A obligation depends on the payer’s entity type.

Banks + coop banks + post office — always

Scheduled commercial banks, cooperative banks engaged in banking, RRBs, and post offices must deduct TDS on interest paid to depositors regardless of the institution’s size.

Companies, firms, LLPs

Any company, partnership firm, LLP, trust, AOP, BOI paying interest on unsecured loans, business borrowings, or NBFC payouts must deduct under 194A.

Individuals + HUFs in tax audit

An individual or HUF paying interest (e.g., interest on a loan from an investor for their proprietorship business) is required to deduct under 194A only if their books were subject to Section 44AB tax audit in the immediately preceding FY. Audit thresholds: turnover > ₹1 cr (or ₹10 cr if ≥ 95% receipts + payments are non-cash); profession gross receipts > ₹50 L (₹75 L for digital-receipts cases).

Non-audit individuals + HUFs — exempt

A non-audit individual / HUF paying interest is outside Section 194A entirely — no TDS obligation, even on substantial interest payments. (The lender, of course, must still declare the income in their own ITR.)

Thresholds + rate (Finance Act 2025)

Finance Act 2025 raised three thresholds effective 1 April 2025. The rate of 10% is unchanged.

Rate: 10%

10% on the interest amount, deducted at the time of credit / payment, whichever is earlier.

Senior citizens (60+): ₹1,00,000 per FY per bank

For a resident individual aged 60 years or more at any time during the FY, banks / cooperative banks / post offices must deduct TDS only if aggregate interest exceeds ₹1,00,000 in the FY (raised from ₹50,000 by Finance Act 2025).

Non-senior individuals: ₹50,000 per FY per bank

For individuals below 60 years, banks / cooperative banks / post offices must deduct only if aggregate interest exceeds ₹50,000 in the FY (raised from ₹40,000 by Finance Act 2025).

Interest from any other payer: ₹10,000 per FY per payee

If the payer is not a bank / cooperative bank / post office — e.g., an NBFC paying interest on a bond, a company paying interest on an unsecured loan, a cooperative society paying interest on its debentures — the threshold is ₹10,000 per payee per FY (raised from ₹5,000 by Finance Act 2025).

No-PAN: 20% (Section 206AA)

If the payee fails to furnish a valid PAN, Section 206AA invokes a penal rate of 20% (instead of 10%).

What is NOT covered by 194A

Several interest categories are deliberately outside 194A — important to know to avoid mis-routing:

Interest on securities — governed by Section 193 (different rate framework). Includes interest on listed debentures, government securities, etc.
Savings account interest — exempt from TDS altogether. Declared in ITR; deductible under Section 80TTA (₹10k cap, non-seniors) or 80TTB (₹50k cap, seniors)
Income tax refund interest — governed by Section 244A; no TDS at source
Partner-to-firm interest (firm paying interest on partner’s capital) — from FY 2025-26 governed by Section 194T, not 194A. Firm / LLP deducts 10% on aggregate partner payments (salary + interest + bonus + commission) > ₹20,000 / FY
NRI / NRO interest — governed by Section 195 (requires TAN; higher rates; DTAA relief)
NRE + FCNR(B) account interest paid by banks to NRIs — exempt under Section 10(4) / 10(4B); no TDS

Form 15G + Form 15H

Section 197A allows a payee to submit a self-declaration to the deductor requesting nil-TDS, where the payee’s estimated income is below the taxable threshold.

Form 15G — for non-seniors (< 60 years)

Two-pronged test:

Estimated total income for the FY is below the basic exemption limit (₹3 L under New Regime; ₹2.5 L under Old Regime)
AND total interest income from all sources in the FY is below the basic exemption limit

Form 15G is therefore much harder to qualify for than Form 15H — the second test fails for most depositors.

Form 15H — for senior citizens (60+)

Single test: estimated final tax liability for the FY is nil. There is no upper bound on interest income — a senior citizen with ₹6 L FD interest + ₹50 L LTCG that’s offset by Section 54 exemption could qualify for 15H if the final tax liability nets to zero.

Submission + compliance

Forms must be submitted to the deductor (typically the bank) at the start of the FY or before the first interest payout. The deductor is required to report all 15G / 15H declarations to the IT department (typically via Form 26Q’s annexure).

False declaration is a prosecutable offence under Section 277. Banks routinely cross-check 15G / 15H declarations against the deductor’s Form 26AS / AIS for inconsistencies.

Section 197 lower-deduction certificate

For payees who don’t qualify for 15G / 15H but anticipate negative final liability (e.g., from carry-forward losses, foreign tax credit, large depreciation), Section 197 allows application to the Jurisdictional Assessing Officer for a certificate authorising lower- or nil-deduction.

The certificate is valid for the period specified (typically the rest of the FY) and must be furnished to the deductor before each interest payout. Common use: large corporations with significant brought-forward losses; export-oriented entities relying heavily on DTAA-based foreign tax credit.

Worked examples

Example 1 — Senior citizen with FD

A 65-year-old retiree earns ₹1,20,000 in aggregate FD + RD interest from a single bank in FY 2025-26.

Threshold for senior: ₹1,00,000 per bank per FY
Interest exceeds threshold
Bank deducts TDS at 10% on the full ₹1,20,000 (not just the excess over threshold) = ₹12,000
Net credited to retiree: ₹1,08,000
Retiree can claim the ₹12,000 as TDS credit in their ITR + may receive a refund if total tax liability is lower

Example 2 — Non-senior across multiple banks

A 45-year-old earns ₹45,000 FD interest from Bank A and ₹40,000 FD interest from Bank B in FY 2025-26.

Threshold per bank: ₹50,000
Bank A: ₹45,000 < ₹50,000 → no TDS
Bank B: ₹40,000 < ₹50,000 → no TDS
Total interest ₹85,000 — still taxable in the ITR (no TDS deducted does not mean no tax)

The per-bank rule means depositors can split deposits across multiple banks to stay below each bank’s individual threshold and avoid TDS — though the income remains taxable when filing the ITR.

Example 3 — Unsecured corporate loan

An SME borrows ₹5 L from an individual angel investor at 12% annual interest.

Annual interest = ₹60,000
Payer is a corporate entity → “other payer” threshold = ₹10,000 (post Finance Act 2025)
Interest exceeds threshold → SME must deduct 10% TDS = ₹6,000
Net paid to investor: ₹54,000

Timing of deduction + deposit

Deduction

At the time of credit to the payee’s account (or any account by whatever name) or payment, whichever is earlier. Banks typically credit accrued FD / RD interest quarterly — TDS is triggered at each quarterly credit, not waiting until maturity.

Deposit

Tax deducted in a month must be deposited by the 7th of the following month via Challan ITNS 281. March deductions: by 30 April.

Reporting

Form 26Q — quarterly TDS return for non-salary deductions. Due dates: Q1 by 31 July, Q2 by 31 October, Q3 by 31 January, Q4 by 31 May
Form 16A — TDS certificate issued to the deductee within 15 days of the Form 26Q due date, downloadable from TRACES

For the TRACES download + correction workflow, see the TRACES Portal Walkthrough.

Common 194A mistakes

Treating savings interest as 194A — savings account interest is NOT subject to 194A TDS. It is taxable in the ITR but the deduction route is Section 80TTA / 80TTB. Banks that incorrectly deduct on savings interest must refund.
Aggregating thresholds across banks — the ₹50,000 / ₹1,00,000 threshold is per-bank, not per-PAN. Two banks each paying ₹40,000 doesn’t aggregate to ₹80,000 for the test.
Senior citizen using Form 15G — the bank will reject. Seniors must use Form 15H, which has the less-restrictive single-test (nil tax liability) compared to 15G’s two-test.
Forgetting RD interest — RD interest counts toward the bank’s aggregate threshold. Splitting across many small RDs at the same bank doesn’t help.
Applying old thresholds post 1 April 2025 — continuing to deduct on a corporate loan interest of ₹8,000 (forgetting that Finance Act 2025 raised the “other payer” threshold to ₹10,000). Results in unnecessary vendor disputes + refund-claim cycles.
Treating partner-firm interest under 194A — from FY 2025-26 this is Section 194T territory (₹20k threshold, firm-side deductor). Mis-routing creates Section 194A short-deduction + Section 194T non-deduction defaults simultaneously.
Confusing cooperative bank vs cooperative society — a cooperative bank’s FD interest follows the bank threshold (₹50k / ₹1L). A cooperative society’s debenture interest follows the “other payer” threshold (₹10k).
No-PAN cases — assuming the standard 10% applies when the depositor / lender hasn’t furnished PAN. Section 206AA forces 20%.

For end-to-end Form 26Q + Form 16A + TRACES reconciliation through a partner CA firm, see the TDS Return Filing service.