Tax is required to be deducted at source on the interest exceeding rupees ten thousand payable during the financial year on 8 % Savings (Taxable) Bonds, 2003 with effect from June 1, 2007 in terms of proviso to clause (iv) of Proviso to Section 193 of the Income Tax Act, 1961 (as inserted vide Finance Act, 2007). Here are some clarification issued by BRI to different banks on the issue of deduction of tax at source from RBI 8 % Savings(Taxable) Bond 2003.
1 Whether TDS is required to be deducted only on new bonds purchased on and from 1.6.2007 or bonds purchased prior to that date when TDS was made applicable?
Answer : Tax Deduction at Source on 8 % Savings (Taxable) Bonds, 2003 is effective from 1.6.2007. Any interest credited or paid on 8 % Savings (Taxable) Bonds, 2003 on or after 1.6.2007 will attract TDS if the amount of interest exceeds 10,000/- rupees for the financial year. Therefore, the date of investment is not a relevant factor. TDS would, thus, apply to existing bond holders also.
2 At what rate TDS is required to be deducted in respect of individuals, HUFs and Institutions?
Answer : If Recipient is company Resident in India
For period 1.6.2007 to 31.3.2008 20%
After 31.3.2008 20%
If Recipient is NOT A company Resident in India
For period 1.6.2007 to 31.3.2008 20%
After 31.3.2008 10%
In case of Non Resident Company 40 % always.
In case of Non Resident Non Company 30% always
Sur-Charge & Cess extra as applicable.
3 Whether Form 15G, 15H can be accepted from eligible individual investors and HUFs and exemption from TDS allowed to them even though interest income exceeds the exemption limit and if the investor declares that his total income for that year will not be taxable on account of investment made by him in various tax savings schemes.
Answer : Declaration in form 15G can be accepted from a person not being a company or a firm if
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a.the tax on his estimated total Income of the previous year in which such income is to be included in computing the total income will be nil; and
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b. the aggregate of income from (i) dividend other than dividends from domestic companies, (ii) interest on securities, (iii) interest other than interest on securities, (iv) repayment of deposits under the National Saving Scheme, and (v) income in respect of units does not exceed the maximum amount which is not chargeable to tax.
2. Declaration in form 15H can be accepted from an individual resident in India, who is of the age of sixty-five years or more at any time during the previous year if
a. tax on his estimated total income of the previous year in which such income is to be included in computing his total income will be nil .
4: In case of ‘cumulative’ type of investments, interest is payable on the date of maturity. In such cases, whether the TDS is required to be deducted on entire interest payable on the date of maturity or on deemed date of payment i.e. on accrual basis every year.
Answer :A certificate issued by the Assessing Officer under section 197 of the Income Tax Act for deduction of tax at a lower rate or Nil rate is required in the case of charitable institutions and trusts.
No special dispensation is allowed to charitable institutions and trusts as far as TDS discipline is concerned.
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