The income tax department on Monday said "banking company" governed by the provisions of the Banking Regulation Act, 1949, will deduct TDS (tax deducted at source) on interest income beyond the prescribed threshold.
Under the Income Tax law, the tax is to be deducted at source if the interest income from bank/post office deposits exceeds Rs 50,000 for ordinary citizens, or Rs 1 lakh for senior citizens, in a financial year.
In a post on X, the income tax department said under Section 402 of the new Income Tax Act, 2025, a "banking company" refers to a company to which the provisions of the Banking Regulation Act, 1949, apply.
As per the Income-tax Act, 1961, the scope of "banking company" included not only banking companies to which the Banking Regulation Act, 1949, applies, but also "any bank or banking institution referred to in section 51 of that Act.
The income tax department said by virtue of the extant Section 51 of the Banking Regulation Act, 1949, such banks and banking institutions fall within the meaning of "banking company" under Section 402 of the Income-tax Act, 2025, even without explicit mention.
"Thus, such banks or banking institutions will not be required to deduct income-tax on the amount below the threshold provided in Section 393 (1)," the I-T department said.
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