TDS on Provident Fund Withdrawal and Interest on Securities
The Income-tax Act, 2025 consolidates most non-salary tax deduction at source provisions in Section 393. From 1 April 2026, payments previously covered by Sections 192A and 193 of the Income-tax Act, 1961 are governed by the corresponding entries and conditions under the new Act.
Provident fund accumulated balance: current TDS position
Under the Income-tax Act, 2025, TDS on a taxable accumulated balance due to an employee from a recognised provident fund is dealt with within the consolidated non-salary TDS provision. The rule applies where the accumulated balance is included in the employee's total income because the exemption conditions applicable to recognised provident funds are not satisfied.
When tax is deducted
The person responsible for paying the taxable accumulated balance must examine the applicable entry under Section 393, the threshold, rate, PAN requirements and the relevant provident-fund provisions before making the payment.
Interest on securities: current TDS position
Interest on securities payable to a resident is also brought within the consolidated TDS framework of Section 393 of the Income-tax Act, 2025. The person responsible for payment must consider the applicable entry, threshold and statutory exclusions or exemptions under the current Act.
As under the earlier law, the timing of deduction can depend on credit or payment, whichever event is specified by the applicable provision. A credit to an interest payable, suspense or similar account may attract the statutory deeming rule where the Act treats it as a credit to the payee.
Legacy Section 192A: Payment of accumulated balance due to an employee
Section 192A required the trustees of the Employees' Provident Fund Scheme, 1952, or an authorised person, to deduct income-tax when paying an accumulated recognised provident-fund balance that became includible in the employee's total income because the exemption rule in Part A of the Fourth Schedule was not applicable.
The provision prescribed a 10 percent deduction rate and contained a monetary threshold below which deduction was not required. The uploaded legacy text records the threshold as Rs. 50,000. It also required the recipient to furnish PAN; failure to furnish PAN attracted the special rate rule prescribed by the Act for that situation.
Legacy Section 193: Interest on securities
Section 193 required a person responsible for paying interest on securities to a resident to deduct income-tax at the applicable rate at the time of credit to the payee's account or payment by cash, cheque, draft or other mode, whichever was earlier, subject to statutory exceptions.
Exceptions under the legacy provision
The section historically contained numerous exclusions for specified government securities, savings instruments, notified securities, certain debentures and interest payable to specified institutional recipients. Some instruments listed in the provision are historical products and should not be treated as currently available investments merely because they remain relevant to older transactions or statutory text.
Government securities and taxable savings bonds
The legacy provision contained an exclusion for interest on Central or State Government securities, subject to specified exceptions. The uploaded text also referred to the special treatment of interest exceeding the prescribed threshold on 8 percent Savings (Taxable) Bonds, 2003 and 7.75 percent Savings (Taxable) Bonds, 2018.
Interest on certain company debentures
The legacy law contained a conditional exemption for certain interest paid to a resident individual or Hindu undivided family on debentures issued by a company in which the public were substantially interested, subject to the monetary and payment-mode conditions then prescribed.
Interest payable to insurers
Section 193 also contained exclusions for specified interest payable to the Life Insurance Corporation of India, General Insurance Corporation and other insurers in respect of securities owned by them or in which they held the required beneficial interest.
Dematerialised listed securities
The legacy section contained a provision concerning interest on securities issued by a company where the security was in dematerialised form and listed on a recognised stock exchange in India, subject to the statutory wording applicable for the relevant period.
1961 Act and 2025 Act transition
| Subject | Up to 31 March 2026 | From 1 April 2026 |
|---|---|---|
| Taxable accumulated recognised PF balance | Section 192A of the Income-tax Act, 1961, where applicable | Relevant entry under Section 393 of the Income-tax Act, 2025 |
| Interest on securities paid to resident | Section 193 of the Income-tax Act, 1961, where applicable | Relevant entry under Section 393 of the Income-tax Act, 2025 |
| Applicable threshold and rate | Use the law in force for the relevant 1961 Act period | Use Section 393, the applicable Finance Act and current rules |
Related Income Tax provisions
Direct payment and salary TDS: Sections 191 and 192
Interest other than interest on securities: Section 194A
Deduction at source and advance payment: Sections 189A and 190
For TDS compliance, determine the date of the relevant payment or credit event and then apply the Act, threshold, rate and exceptions in force for that period.