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

## Key Practical Rules

### 1. Aggregation of Bank Interest Across Branches

When computing TDS on Fixed Deposits:

If the Bank has adopted Core Banking Solutions (CBS), the aggregate interest of ALL branches of the bank for the same customer is to be considered for the TDS threshold.
If interest from all branches together crosses the ₹40,000 / ₹50,000 (senior citizen) threshold, TDS is deductible.

### 2. Service Fee Paid to a Banking Company

Where the service fee is paid to a banking company, No TDS is applicable u/s 194A, even though service fee may technically be included within the definition of 'Interest'. (Service fees are excluded by specific carve-out.)

### 3. Macro-Monitoring Credit Entries

Where a Bank credits interest only for macro-monitoring purposes (using its Core-Banking Software) without it being a credit to the customer's account in substance, TDS u/s 194A is NOT applicable (no real income arises at that stage).

### 4. Motor Accidents Claims Tribunal (MACT) — Interest by Transport Company

Where interest is paid by a Transport Company on an MACT award, TDS u/s 194A is deductible if the interest paid exceeds ₹50,000.

Worked example

### Example 1

Q: Mr. K has FDs with three different branches of SBI (which uses CBS). Interest credited: Branch A — ₹18,000; Branch B — ₹15,000; Branch C — ₹12,000. Is TDS deductible?

Solution: Aggregate interest = ₹45,000. Since SBI uses CBS, all branches are aggregated. Crosses the ₹40,000 threshold → TDS deductible on ₹45,000.

### Example 2

Q: ABC Transport Ltd is directed by MACT to pay ₹3,00,000 as interest to a claimant on a compensation award. Is TDS u/s 194A required?

Solution: Yes, interest exceeds ₹50,000 → TDS u/s 194A is deductible at 10% on the interest portion.

### Example 3

Q: XYZ Bank charges its customer a 'cheque return fee' of ₹500. Is this subject to TDS u/s 194A by the customer?

Solution: Even if the bank's charge falls within the broad definition of 'interest', service fees paid to a banking company are specifically excluded — No TDS required.

⚠️ Common exam mistakes

Computing the TDS threshold u/s 194A branch-wise (instead of bank-wide) for CBS banks.
Deducting TDS on routine bank service charges treated as 'interest'.
Forgetting that interest paid by transport companies on MACT awards crosses the ₹50,000 threshold for TDS — not the general ₹40,000.
Treating macro-monitoring CBS entries as a TDS-triggering credit.

Reference: Section 194A — Income-tax Act, 1961

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Section 194A — TDS on Interest other than on Securities

Worked example

⚠️ Common exam mistakes