Tds applicablity if interest above 250000

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RUPESH DESHMUKH (Querist)
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19 December 2018 Sir, I have a query about TDS applicability if my payable interest on deposit will be above 250000 during financial year. In this connection I submitted a Form 15G to bank for non deduction of TDS on interest in 1st quarter. During the 1st and 2nd Quarter my payable interest was bellow 250000. In 3rd Quarter I make new FDR with bank and my payable interest will go above 250000/- up to the 31/03/2019. In my 26AS interest paid during the 1st and 2nd quarter reflected. So in 3rd quarter bank deducted my TDS from 1st quarter cause of my payable interest will be above threshold limit of Income Tax 250000/-
So kindly please guide me, bank can deduct my TDS from 1st Quarter? and If yes, How they reflect the interest paid to me in my 26AS.

Z (Expert)
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19 December 2018 The liability to deduct tax materializes when either the payment is made or the account is credited, whichever is earlier.
It appears that you get quarterly interest on FD's made by you.
The tax was deductible if the interest income would have been more than 10,000 in case of banks, but it was not so deducted by virtue of S.197A. Once your declaration becomes invalid, the interest accruing/paid on account of such FD becomes liable to deduction of tax at source.

Let the bank deduct the tax, but if you believe that tax deduction is more than the tax which would be payable by you then you may apply, u/s 197(1), for certificate of lower deduction to your assessing officer under rule 28 and in Form-13.

S.194A(4) entitles the deductor to ADJUST any excess or deficiency. Therefore, the bank may deduct tax from previous quater.
But in my personal opinion, the previous quater's figure should not be touched because at that time the declaration was valid and the action of the bank was as per the law. But since there is no judgement in this regards (atleast in my knowledge), I am not saying that touching previous quater figure is wrong, but it does not seems logical and would have some consequences to the deductor.

S.194(A)(4) (for reference purpose)
"The person responsible for making the payment referred to in sub-section (1) may, at the time of making any deduction, increase or reduce the amount to be deducted under this section for the purpose of adjusting any excess or deficiency arising out of any previous deduction or failure to deduct during the financial year."

Kindly note that since your income will exceed 2.50 Lakhs, your declaration will become false. You must intimate about your income exceeding the 2.50 Lakhs limit to the AO and the bank (in written) lest there can be some SERIOUS CONSEQUENCES like-
As per S.277, If a person makes a statement in any verification under this Act or under any rule made thereunder, or delivers an account or statement which is false, and which he either knows or believes to be false, or does not believe to be true, he shall be punishable,—

(i) in a case where the amount of tax, which would have been evaded if the statement or account had been accepted as true, exceeds twenty-five hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine;

(ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to two years and with fine.

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