Who is liable to deduct tax [Section 194A(1)]
The person (other than an individual or a Hindu Undivided Family) who is responsible for paying to a resident any income by way of interest other than ‘interest on securities’, is required to deduct tax thereon at the rates in force.
Individuals and HUF whose total sales, gross receipts or turnover from the business or profession carried on by him exceed ₹1 crore in case of business or ₹50,00,000 in case of profession during the financial year immediately preceding the financial year are also required to deduct tax at source.
Person responsible for TDS: In the case of credit or, as the case may be, payment or any other sum chargeable under the provisions of this Act, the payer himself, or, if the payer is a company, the company itself including the principal officer thereof.
When TDS is to be deducted under Section 194A
Tax is to be deducted either at the time of payment of interest in cash or by issue of cheque or draft or by any other mode or credit of it to any account, whichever is earlier.
Where any income by way of interest as aforesaid is credited to any account whether called “Interest payable account” or “Suspense Account” or by any other name in the books of account of the person liable to pay such income, such crediting shall be deemed to be credit of such income to the account of the payee.
Tax not to be deducted at source in respect of the provision for interest accrued but not due: The whole scheme of TDS proceeds on the assumption that the person whose liability is to pay an income knows the identity of the beneficiary or the recipient of the income. In this view of the matter, TDS mechanism cannot be put into practice until identity of the person in whose hands it is includable as income can be ascertained.