194A TDS is a 10% deduction on interest that is not interest on securities, such as interest on fixed deposits, recurring deposits and loans. For FY 2025-26 a bank or post office deducts only when its interest to you crosses ₹50,000 in the year (₹1,00,000 if you are 60 or older), and every other payer deducts above ₹10,000.
The section matters to two groups. Depositors want to know why their bank cut tax. Businesses that borrow from relatives, directors or other firms must deduct on the interest they pay. This page covers both, then shows how the same rule moved into the 2025 Act. For the bank side alone, read TDS on FD interest.
Quick facts
Rate
10% for residentsBank, co-op bank, post office
₹50,000 a year; ₹1,00,000 for senior citizensAny other payer
₹10,000 a yearNo PAN
20%Deposit by
7th of the next month; 30 April for MarchReturn and certificate
Form 26Q each quarter, Form 16A to the payeeFrom tax year 2026-27
Covered in the TDS table under section 393
194A TDS rate and limit table for FY 2025-26
| Payer of interest | Yearly limit per payee | Rate with PAN |
|---|---|---|
| Bank, co-operative bank in banking, post office deposit | ₹50,000 | 10% |
| Same payers, payee is a resident aged 60 or more | ₹1,00,000 | 10% |
| Company, firm, NBFC, trust, other business | ₹10,000 | 10% |
| Individual or HUF whose accounts needed audit in the prior year | ₹10,000 | 10% |
The limit is a yearly total from one payer to one person. Once the total is likely to cross it, tax is cut on the whole interest, not only on the excess. These limits were raised by the Finance Act, 2025, so old charts showing ₹40,000 and ₹5,000 are out of date for FY 2025-26.
Interest covered by 194A TDS, and what is left out
- Deposits: fixed and recurring deposits with banks, co-operative banks, post offices and companies.
- Loans and advances: interest on unsecured loans taken from people, firms or companies, including interest on delayed payment to a supplier when the contract treats it as interest.
- Not covered: interest on securities such as debentures and bonds (section 193), interest paid to a bank, insurer or other notified lender, and interest a firm pays to its own partners, which since FY 2025-26 falls under 194T.
Tax is cut when interest is credited or paid, whichever happens first. A credit to an "interest payable" or provision account at year end counts as a credit, even if no cash moves.
TDS on interest on an unsecured loan: worked example
A private company borrows from a director's brother. The loan is ₹6,00,000 at 12% a year, so interest is ₹72,000 for FY 2025-26, credited at ₹6,000 a month.
- The payer is a company, so the limit is ₹10,000, and the yearly interest will clearly cross it.
- TDS at 10% on the full ₹72,000 is ₹7,200.
- The company cuts ₹600 from each monthly credit, pays the lender ₹5,400 a month and deposits ₹600 by the following 7th.
- The lender sees ₹7,200 in Form 26AS and claims it against tax on the full ₹72,000.
A retired teacher's deposits. She is 67 and earns ₹88,000 of FD interest from one bank. That is under the ₹1,00,000 senior limit, so the bank deducts nothing. The interest is still taxable, and she must show it in her return.
Who must deduct, and the Form 15G or 15H route
Every payer except an individual or HUF must deduct. An individual or HUF deducts only if turnover or receipts in the year before crossed the tax audit limit under section 44AB. A family lending to another family member does not trigger 194A on either side.
A depositor whose total income is below the taxable limit can give the bank a self-declaration at the start of the year: Form 15G below 60, Form 15H at 60 or above. For tax year 2026-27 both are replaced by Form 121. A false declaration is an offence, so give one only if no tax is truly payable on your income.
Deposit, return and certificate dates
| Step | Due |
|---|---|
| Pay the tax with Challan ITNS 281 | 7th of the next month; 30 April for March deductions |
| File Form 26Q | 31 July, 31 October, 31 January, 31 May |
| Issue Form 16A | Within 15 days of the return due date |
| Late deduction interest | 1% a month |
| Late payment interest | 1.5% a month after deduction |
Pay through the e-filing portal and download certificates from TRACES. The interest rules are worked through on the late payment interest page.
194A after 1 April 2026: section 393
| Point | FY 2025-26 (1961 Act) | Tax year 2026-27 (2025 Act) |
|---|---|---|
| Where the rule sits | Section 194A | TDS table under section 393 |
| Rate | 10% | 10% |
| Bank limit | ₹50,000; ₹1,00,000 seniors | ₹50,000; ₹1,00,000 seniors |
| Nil TDS declaration | Form 15G or 15H | Form 121 |
Interest credited during FY 2025-26 is reported under 194A. Credits on or after 1 April 2026 follow the 2025 Act references.
194A errors that cost money
| What goes wrong | How to put it right |
|---|---|
| Using the ₹50,000 bank limit for a loan from a company | Only banks, co-operative banks and post offices get the higher limit; others use ₹10,000 |
| Skipping TDS on a year-end interest provision | Deduct on the credit date, then pay by 30 April for March |
| Deducting under 194A on interest to partners | From FY 2025-26 use 194T for partner interest |
| Depositor assumes no TDS means no tax | Add all interest in the return and pay tax at your slab |
General information on Indian TDS law only. Thresholds and forms are revised often, so check the official portal or ask a chartered accountant about your own facts.
Sources we checked
- Income-tax Act, 1961, section 194A
- Finance Act, 2025
- Income-tax Act, 2025, section 393
- Income-tax Rules, 2026
Frequently asked questions
What is the 194A TDS rate?
The 194A TDS rate is 10% for resident payees who give a PAN. Without a PAN the rate is 20%. Non-residents are covered by a different section.
What is the 194A TDS limit for FY 2025-26?
Banks, co-operative banks and post offices deduct when interest to one person crosses ₹50,000 in the year, or ₹1,00,000 for senior citizens. All other payers deduct once yearly interest crosses ₹10,000.
Is TDS deducted on interest on a loan from a friend?
If the borrower is a company, firm or audited business, yes, once yearly interest is above ₹10,000. An individual borrower without a prior year tax audit does not deduct.
Which TDS on interest section applies to a bank deposit?
Section 194A covers TDS on interest income from bank, post office and company deposits. Interest on debentures and bonds sits under section 193 instead.
Does 194A apply to interest paid to partners?
No. Interest a firm pays its partners was always outside 194A. From FY 2025-26 it is covered by section 194T at 10% once the yearly total crosses ₹20,000.
Where is section 194A in the new Income-tax Act?
From tax year 2026-27 it is one entry in section 393 of the 2025 Act, keeping 10% and the same limits.