No TDS on Payments to Specified Institutions
Introduction
No TDS is required on interest, dividends, or other income payable to specified entities, including the Government, RBI, Mutual Funds, and other tax-exempt bodies.
Key Provisions
- Deductor:Any person making payments of interest, dividends, or other income.
- Deductee:The following entities are exempt from TDS:
o The Government
o The Reserve Bank of India (RBI)
o Corporations established under a Central Act that are exempt from income tax.
o Mutual Funds specified under Section 10(23D).
- Exemption Conditions:
o The exemption from TDS in respect of interest or dividend applies only if the income is from shares or securities owned by the exempt entities or in which they have full beneficial interest.
Exemption for Statutory Bodies under Section 10
The CBDT vide Circular No. 18/2017, dated 29-05-2017, clarified that no TDS is required on payments to entities whose income is unconditionally exempt under Section 10 and who are not required to file income tax returns under Section 139. Entities exempt from TDS include:
- Local authority [Section 10(20)]
- Regimental Fund or Non-public Fund established by the Armed Forces of the Union [Section 10(23AA)]
- Fund set up by the LIC or by any other insurer [Section 10(23AAB)]
- Authority established for development of Khadi or Village Industries (whether known as Khadi and Village Industries Board or by any other name) [Section 10(23BB)]
- Body or authority constituted or appointed by or under any Central, State or Provincial Act [Section 10(23BBA)]
- SAARC Fund for Regional Projects set up by Colombo Declaration [Section 10(23BBC)]
- Insurance Regulatory and Development Authority [Section 10(23BBE)]
- Central Electricity Regulatory Commission [Section 10(23BBG)]
- Prasar Bharti [Section 10(23BBE)]
- Prime Minister’s National Relief Fund [Section 10(23C)(i)]
- Prime Minister’s Fund for promotion of Folk Art [Section 10(23C)(i)]
- Prime Minister’s Aid to Students Fund [Section 10(23C)(iii)]
- National Foundation for Communal Harmony [Section 10(23C)(iiia)]
- Swatch Bharat Kosh [Section 10(23C)(iiiaa)]
- Clean Ganga Fund [Section 10(23C)(iiiaaa)]
- Provident fund to which the PF Act, 1925 [Section 10(25)(i)]
- Recognised provident fund [Section 10(25)(ii)]
- Approved superannuation funds [Section 10(25)(iii)]
- Approved Gratuity Fund [Section 10(25)(iv)]
- Other Funds [Section 10(25)(v)]
- Employees’ State Insurance Fund [Section 10(25A)]
- Agricultural Produce Marketing Committee [Section 10(26AAB)]
- Corporations established for promoting interests of members of Scheduled Castes or Scheduled Tribes or backward classes [Section 10(26B)]
- Corporations established for promoting interests of members of minority community [Section 10(26BB)]
- Corporations established for the welfare and economic upliftment of ex-servicemen being the citizens of India [Section 10(26BBB)]
- New Pension System Trust [Section 10(44)]