## Section 194A — TDS on Interest (Other than Securities)

### Aggregation Across Bank Branches (CBS Rule)

When a bank deducts TDS on fixed deposits, the aggregate interest of ALL branches of the bank shall be considered — IF the bank has adopted Core Banking Solutions (CBS).

→ This prevents tax evasion by splitting FDs across branches.

### Service Fee Paid to Banks

Where a service fee is paid to a banking company → NO TDS u/s 194A

→ Even though the definition of 'Interest' technically includes service fees.

### Macro-Monitoring Credit (Provisional Interest)

When a Bank credits interest for macro-monitoring purposes through Core-Banking Software (not actually paid to customer):

→ TDS u/s 194A is NOT applicable on such notional/provisional credit.

### Interest on Motor Accident Claims (MACT)

TDS u/s 194A is to be deducted if:

Interest is paid by Transport Company on Motor Accidents Claims Tribunal awards, AND
Interest paid > ₹50,000

→ Below ₹50,000, no TDS required.

Worked example

### Example 1

Example 1 — CBS Bank FDs:

Mr. Z has 3 FDs at different branches of SBI (which uses CBS):

Branch A: Interest ₹18,000
Branch B: Interest ₹15,000
Branch C: Interest ₹20,000

Analysis: Total aggregated interest = ₹53,000 (exceeds threshold of ₹40,000 for non-senior). SBI must deduct TDS u/s 194A on the aggregate as it has adopted CBS.

Example 2 — MACT Interest:

A transport company pays ₹75,000 as interest on a MACT award to a claimant.

Analysis: Interest exceeds ₹50,000 → TDS u/s 194A applicable.

If the interest had been ₹45,000, no TDS would have been required.

⚠️ Common exam mistakes

Checking the ₹40,000/₹50,000 limit branch-wise rather than aggregating across all CBS branches.
Deducting TDS on service fees paid to a bank — explicitly excluded from 194A obligation.
Deducting TDS on macro-monitoring/provisional internal credits — these are not actual interest payments.
Applying ₹40,000 (general) limit to MACT interest paid by transport companies — the specific threshold is ₹50,000.

Bare-Act text Section 194A · Income-tax Act, 1961 · click to expand

While deducting TDS on fixed deposits, the aggregate interest of all branches of the Bank shall be considered if Bank has adopted Core Banking Solutions. Where the service fee is paid to a banking co., No TDS is applicable u/s 194A even though service fee is included in the definition of 'Interest'. TDS u/s 194A is deducted if Interest is paid on Motor Accidents Claims Tribunal by Transport Company if Interest paid > Rs. 50,000.

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Section 194A - TDS on Interest (Other than Interest on Securities)

Worked example

⚠️ Common exam mistakes