Dear Sir We have taken loan through Buyers Credit with usance period of 90 days. TDS under section 195 needs to be deducted on interest to be paid to the foreign Bank. In this transaction It might happens that interest will be booked at one rate of Foreign Currency but at the time of Payment Interest Liability may increase due to variance in rate of Foreign Currency. Due to increase in the Interest amount TDS liability will also increase with the increase of Foreign Currency rate? Example is given below explaining our scenario:-
At the time of Credit:- Interest 10 USD @ Rs.40 = Rs.400 TDS u/s 195@10% 1 USD @Rs.40 = Rs.40
At the time of Payment:- Interest 10 USD @ Rs.50 = Rs.500 We would like to know whether TDS needs to be paid on Rs.100 paid extra as interest on Exchange Rate Variance? Kindly guide us as soon as possible.