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April 2010

CBDT Circular No. 03/2010 [F. NO. 275/66/2007-IT(B)], dated 2-3-2010 regarding tax deduction at source u/s.194A on payment of interest on time deposits by banks.

By Pinky Shah, Sonalee Godbole, Gaurang Gandhi, Tarun Ghia, Brijesh Cholera, Pratik Mehta | Chartered Accountants
Sejal Vasa | Company Secretary
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1 CBDT
Circular No. 03/2010 [F. NO. 275/66/2007-IT(B)], dated 2-3-2010 regarding tax
deduction at source u/s.194A on payment of interest on time deposits by banks.

The CBDT has clarified that
tax should not be deducted at source on interest provided by banks on time
deposits on daily or monthly basis. Tax should be deducted at source on accrual
of interest at the end of the financial year or at periodic intervals as per
practice of the bank or as per depositors’ requirement or on maturity or
encashment of time deposits, whichever is earlier.

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