i have question to ask you.there is a one company where they have raised long term loan of about 90 lacs state bank of patiala & they pay interest of about rs.11 lacs on it.i think we need to deduct tds on it or don't we have to????need u reply.urgent.
AS PER SEC 194A INTEREST PAYMENT MADE TO ANY BANKING COMPANY, CO-OPERATIVE SOCIETY ENGAGED IN BANKING BUSINESS, PUBLIC FINANCIAL INSTITUTIONS, LIC, UTI, CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF INSURANCE OR ANY NOTIFIED INSTUTITY , IS NOT LIABLE TO TDS
DON'T WORRY AND CARRY ON
Clause (iii) of sb section (3) of section 194A clearly provides for non deduction of tax at source from payments to any banking company to which the Banking Regulation act, 1949 applies. Therefore no tax is deductible in case of payment of interest to State Bank of Patiala.
Section 194A has a long lists of exempted category of instituions, and various individual entities have also been notified as exempt from the operations of tds U/S. 194a. Besides this, various financial instituions are also regularly obtaining NIL deduction certificate under Section 197 for the interest payments to be received in any particular financial year.
Barring these cases, ineterst paid to all other entities have to be subjected to TDS u/s. 194A.