The Income Tax Department said on Monday that “banking companies” falling under the provisions of the Banking Regulation Act, 1949, will deduct TDS on interest income in excess of the prescribed limit. According to the Income Tax Law, if the interest income received from bank or post office deposits exceeds Rs 50,000 for general citizens and Rs 1 lakh for senior citizens in a financial year, then TDS is deducted on it.
The Income Tax Department informed on social media platform X that under Section 402 of the new Income Tax Act, 2025, banking company means those companies to which the Banking Regulation Act, 1949 applies. The definition of banking company under the Income Tax Act, 1961 includes not only those companies but also any bank or banking institution mentioned in section 51 of that Act.
Clarification on TDS on interest u/s Section 194A in the case of banking institutions.
Under the provisions of Section 194A of the Income-tax Act, 1961, tax is required to be deducted at source on interest other than interest on securities. However, in terms of provisions of
— Income Tax India (@IncomeTaxIndia) March 30, 2026
The department clarified that such banks and banking institutions falling under the current Section 51 of the Banking Regulation Act, 1949, will be considered included in the definition of banking company under Section 402 of the Income Tax Act, 2025, even if they are not clearly mentioned. The Income Tax Department said that thus such banks or banking institutions will not be bound to deduct income tax on amounts less than the limit prescribed in Section 393(1).