New TDS Rules for Banking Companies Under Income Tax Act

The Income Tax Department has announced that 'banking companies' governed by the Banking Regulation Act, 1949, are mandated to deduct TDS on interest income that surpasses specific limits. This stipulation, under the Income Tax Act of 2025, ensures such deductions occur when interest income exceeds Rs 50,000 for ordinary citizens or Rs 1 lakh for senior citizens annually.

According to the department's post on X, Section 402 of the new act explicitly includes 'banking companies' subject to the Banking Regulation Act's provisions. This broad definition encompasses not only banking companies but any financial institution referred to in Section 51 of the act.

The department reiterated that by current section guidelines, these financial institutions meet the 'banking company' criteria under Section 402, exempting them from TDS deductions on amounts below the prescribed threshold, as per Section 393 (1).