CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 193 — Interest on Securities (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Mechanical; lightly litigated.
Finance Act, 2026: No amendment.
Mechanism: The payer of interest on securities deducts tax at the time of credit or payment (whichever is earlier) at the prescribed rate, subject to the statutory exemptions in the provisos.
Litigation profile: Thin. Disputes concern characterisation (section 193 vs section 194A) and circulars — the candour rule applies.
A. SECTION COMMENTARY
Section 193 is the deduction provision for 'interest on securities', an expression defined in section 2(28B) to mean interest on Central or State Government securities and interest on debentures or other securities issued by or on behalf of a local authority, a company or a statutory corporation. The person responsible for paying such interest to a resident must deduct tax at the time of credit or payment, whichever is earlier. Historically 'interest on securities' was a separate head of income (under the 1922 Act and until 1988-89 under the 1961 Act); it is now assessed under 'other sources' or 'business', but it retains its own deduction code in section 193.
The 'credit to any account' Explanation
Like section 194A, section 193 contains the deeming rule that crediting the interest to an 'interest payable account', 'suspense account' or any other account in the payer's books is treated as credit to the payee, so that the deduction obligation cannot be deferred by routing the entry through a holding account. The obligation is triggered by the earlier of credit and payment.
Exemptions and their narrowing
The provisos to section 193 carry a list of exemptions — for example certain Government securities, and (historically) interest on listed dematerialised securities. Several of these carve-outs have been narrowed by successive Finance Acts (notably the withdrawal of the exemption for interest on listed securities held in dematerialised form), so the operative exemption list must always be read as it stands for the relevant year. Where the payee has no PAN, section 206AA forces deduction at the higher prescribed rate.
Why merits authority is thin
Section 193 is largely mechanical and is rarely litigated on its own terms; most disputes are about the characterisation of a receipt as 'interest on securities' versus other interest (governing whether section 193 or section 194A applies) or about the binding force of beneficial CBDT circulars. In candour, there is little direct section 193 merits authority; the cognate principles below carry the weight.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
193. The person responsible for paying to a resident any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, being the amount or the aggregate of amounts exceeding ten thousand rupees during the financial year, deduct income-tax at the rates in force on the amount of the interest payable :
Provided that no tax shall be deducted from—
(i) any interest payable on 4¼ per cent National Defence Bonds, 1972, where the bonds are held by an individual, not being a non-resident; or
(ia) any interest payable to an individual on 4¼ per cent National Defence Loan, 1968, or 4¾ per cent National Defence Loan, 1972; or
(ib) any interest payable on National Development Bonds; or
(ii) ***
(iia) any interest payable on 7-Year National Savings Certificates (IV Issue); or
(iib) any interest payable on such debentures, issued by any institution or authority, or any public sector company, or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(iii) any interest payable on 6½ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, where the Bonds are held by an individual not being a non-resident, and the holder thereof makes a declaration in writing before the person responsible for paying the interest that the total nominal value of the 6½ per cent Gold Bonds, 1977, or, as the case may be, the 7 per cent Gold Bonds, 1980, held by him (including such bonds, if any, held on his behalf by any other person) did not in either case exceed ten thousand rupees at any time during the period to which the interest relates;
(iiia) ***
(iv) any interest payable on any security of the Central Government or a State Government: Provided that nothing in this clause shall apply to the interest exceeding ten thousand rupees payable during the financial year on 8% Savings (Taxable) Bonds, 2003 or 7.75% Savings
(Taxable) Bonds, 2018 or Floating Rate Savings Bonds, 2020 (Taxable) or any other security of the Central Government or State Government as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(v) any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if—
(a) the amount of interest or, as the case may be, the aggregate amount of such interest paid or likely to be paid on such debenture during the financial year by the company to such individual or Hindu undivided family does not exceed ten thousand rupees; and
(b) such interest is paid by the company by an account payee cheque;
(vi) any interest payable to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), inrespect of any securities owned by it or in which it has full beneficial interest; or
(vii) any interest payable to the General Insurance Corporation of India (hereafter in this clause referred to as the Corporation) or to any of the four companies (hereafter in this clause referred to as such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any securities owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest; or
(viii) any interest payable to any other insurer in respect of any securities owned by it or in which it has full beneficial interest; (ix) any interest payable to a "business trust", as defined in clause (13A) of section 2, in respect of any securities, by a special purpose vehicle referred to in the Explanation to clause (23FC) of section 10.
Explanation.—For the purposes of this section, where any income by way of interest on securities 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 and the provisions of this section shall apply accordingly.
Explanation 2.—Omitted by the Finance Act, 1992, w.e.f. 1-6-1992.
C. AUTHORITIES
Candour rule: section 193 generates little direct merits litigation. The authorities offered are cognate — on the binding force of circulars and on default — together with the statutory definition in section 2(28B).
Principle: 'Interest on securities' is confined to interest on Government securities and on debentures/securities of a local authority, company or corporation. A receipt outside this definition is not within section 193; interest of other kinds falls under section 194A. Characterisation therefore decides which deduction section applies.
UCO Bank v. CIT (1999) 237 ITR 889 (SC) — cognate on circulars
Principle: Beneficial circulars issued by the CBDT under section 119, which relax the rigour of the law in favour of the assessee, are binding on the Revenue even if they depart from the strict statutory position.
Use: Supports reliance on CBDT circulars that relax or clarify the section 193 deduction obligation in particular fact-situations.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery of tax from the deductor under section 201(1) where the payee has paid the tax; interest under section 201(1A) runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 193.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 193 — Interest on Securities (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Mechanical; lightly litigated.
Finance Act, 2026: No amendment.
Mechanism: The payer of interest on securities deducts tax at the time of credit or payment (whichever is earlier) at the prescribed rate, subject to the statutory exemptions in the provisos.
Litigation profile: Thin. Disputes concern characterisation (section 193 vs section 194A) and circulars — the candour rule applies.
A. SECTION COMMENTARY
Section 193 is the deduction provision for 'interest on securities', an expression defined in section 2(28B) to mean interest on Central or State Government securities and interest on debentures or other securities issued by or on behalf of a local authority, a company or a statutory corporation. The person responsible for paying such interest to a resident must deduct tax at the time of credit or payment, whichever is earlier. Historically 'interest on securities' was a separate head of income (under the 1922 Act and until 1988-89 under the 1961 Act); it is now assessed under 'other sources' or 'business', but it retains its own deduction code in section 193.
The 'credit to any account' Explanation
Like section 194A, section 193 contains the deeming rule that crediting the interest to an 'interest payable account', 'suspense account' or any other account in the payer's books is treated as credit to the payee, so that the deduction obligation cannot be deferred by routing the entry through a holding account. The obligation is triggered by the earlier of credit and payment.
Exemptions and their narrowing
The provisos to section 193 carry a list of exemptions — for example certain Government securities, and (historically) interest on listed dematerialised securities. Several of these carve-outs have been narrowed by successive Finance Acts (notably the withdrawal of the exemption for interest on listed securities held in dematerialised form), so the operative exemption list must always be read as it stands for the relevant year. Where the payee has no PAN, section 206AA forces deduction at the higher prescribed rate.
Why merits authority is thin
Section 193 is largely mechanical and is rarely litigated on its own terms; most disputes are about the characterisation of a receipt as 'interest on securities' versus other interest (governing whether section 193 or section 194A applies) or about the binding force of beneficial CBDT circulars. In candour, there is little direct section 193 merits authority; the cognate principles below carry the weight.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
193. The person responsible for paying to a resident any income by way of interest on securities shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, being the amount or the aggregate of amounts exceeding ten thousand rupees during the financial year, deduct income-tax at the rates in force on the amount of the interest payable :
Provided that no tax shall be deducted from—
(i) any interest payable on 4¼ per cent National Defence Bonds, 1972, where the bonds are held by an individual, not being a non-resident; or
(ia) any interest payable to an individual on 4¼ per cent National Defence Loan, 1968, or 4¾ per cent National Defence Loan, 1972; or
(ib) any interest payable on National Development Bonds; or
(ii) ***
(iia) any interest payable on 7-Year National Savings Certificates (IV Issue); or
(iib) any interest payable on such debentures, issued by any institution or authority, or any public sector company, or any co-operative society (including a co-operative land mortgage bank or a co-operative land development bank), as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(iii) any interest payable on 6½ per cent Gold Bonds, 1977, or 7 per cent Gold Bonds, 1980, where the Bonds are held by an individual not being a non-resident, and the holder thereof makes a declaration in writing before the person responsible for paying the interest that the total nominal value of the 6½ per cent Gold Bonds, 1977, or, as the case may be, the 7 per cent Gold Bonds, 1980, held by him (including such bonds, if any, held on his behalf by any other person) did not in either case exceed ten thousand rupees at any time during the period to which the interest relates;
(iiia) ***
(iv) any interest payable on any security of the Central Government or a State Government: Provided that nothing in this clause shall apply to the interest exceeding ten thousand rupees payable during the financial year on 8% Savings (Taxable) Bonds, 2003 or 7.75% Savings
(Taxable) Bonds, 2018 or Floating Rate Savings Bonds, 2020 (Taxable) or any other security of the Central Government or State Government as the Central Government may, by notification in the Official Gazette, specify in this behalf;
(v) any interest payable to an individual or a Hindu undivided family, who is resident in India, on any debenture issued by a company in which the public are substantially interested, if—
(a) the amount of interest or, as the case may be, the aggregate amount of such interest paid or likely to be paid on such debenture during the financial year by the company to such individual or Hindu undivided family does not exceed ten thousand rupees; and
(b) such interest is paid by the company by an account payee cheque;
(vi) any interest payable to the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), inrespect of any securities owned by it or in which it has full beneficial interest; or
(vii) any interest payable to the General Insurance Corporation of India (hereafter in this clause referred to as the Corporation) or to any of the four companies (hereafter in this clause referred to as such company), formed by virtue of the schemes framed under sub-section (1) of section 16 of the General Insurance Business (Nationalisation) Act, 1972 (57 of 1972), in respect of any securities owned by the Corporation or such company or in which the Corporation or such company has full beneficial interest; or
(viii) any interest payable to any other insurer in respect of any securities owned by it or in which it has full beneficial interest; (ix) any interest payable to a "business trust", as defined in clause (13A) of section 2, in respect of any securities, by a special purpose vehicle referred to in the Explanation to clause (23FC) of section 10.
Explanation.—For the purposes of this section, where any income by way of interest on securities 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 and the provisions of this section shall apply accordingly.
Explanation 2.—Omitted by the Finance Act, 1992, w.e.f. 1-6-1992.
C. AUTHORITIES
Candour rule: section 193 generates little direct merits litigation. The authorities offered are cognate — on the binding force of circulars and on default — together with the statutory definition in section 2(28B).
Cognate principles
Definition — section 2(28B)
Principle: 'Interest on securities' is confined to interest on Government securities and on debentures/securities of a local authority, company or corporation. A receipt outside this definition is not within section 193; interest of other kinds falls under section 194A. Characterisation therefore decides which deduction section applies.
Use: The gateway test for section 193.
UCO Bank v. CIT (1999) 237 ITR 889 (SC) — cognate on circulars
Principle: Beneficial circulars issued by the CBDT under section 119, which relax the rigour of the law in favour of the assessee, are binding on the Revenue even if they depart from the strict statutory position.
Use: Supports reliance on CBDT circulars that relax or clarify the section 193 deduction obligation in particular fact-situations.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery of tax from the deductor under section 201(1) where the payee has paid the tax; interest under section 201(1A) runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 193.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.