# TDS on Interest — Section 194A

## Key Exemption

No TDS under section 194A on interest paid to a banking company to which the Banking Regulation Act, 1949 applies.

## Rule

When a business borrower pays interest to a bank (e.g., UCO Bank, SBI), section 194A is not attracted regardless of the amount.

## Threshold for Non-Bank Interest Payees

Generally ₹ 5,000 per FY (₹ 50,000 for senior citizens on bank deposits).
Banking, co-operative society engaged in banking, and post office deposits have higher thresholds.

## Applicability of Deductor Status

An individual / HUF is required to deduct TDS u/s 194A only if turnover from business exceeded ₹ 1 crore or gross receipts from profession exceeded ₹ 50 lakh in the preceding FY.

Worked example

### Example 1

Example — Ashwin (turnover ₹ 1.05 crore in FY 2024-25) pays interest of ₹ 41,000 to UCO Bank on 15.8.2025

Although Ashwin's preceding-year turnover exceeded ₹ 1 crore (making him a person liable to deduct), interest paid to a bank is exempt from TDS under section 194A(3)(iii). No TDS required.

⚠️ Common exam mistakes

Deducting TDS on interest paid to banks — banks are excluded by statute.
Forgetting that the individual/HUF deductor test uses the preceding FY's turnover, not the current year's.

Bare-Act text Section 194A(3)(iii) · Income-tax Act, 1961 · click to expand

Section 194A(3)(iii) - The provisions of sub-section (1) shall not apply to such income credited or paid to any banking company to which the Banking Regulation Act, 1949 applies.

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Section 194A - TDS on Interest (Bank Exemption)

Worked example

⚠️ Common exam mistakes