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Tds on loan processing fee

Jatin (B.Com) (473 Points)

24 June 2016

Dear Experts, Please advise me in respect of TDS decucted or not on Loan Processing Fee paid to NBFC by Thanks in advance Jatin

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3 Replies

CA Harshal Totla (Chartered Accountant) (2229 Points)
Replied 24 June 2016

As defined u/s 2(28A) interest includes any service fee or other charges in respect of moneys borrowed or debt incurred or in respect of credit facility which has not been utilised;

as per above definition processing charges are part of interest hence TDS will be dedutible as per sec 194A.

In case payment is to a bank same is exempt as per sec 194A (3).

In case payment is to NBFC TDS is deductible u/s 194A.

Hamza Ansari (Accountant) (217 Points)
Replied 24 June 2016

In my opinion processing charges are in the nature of interest and included in the definition of interest as stipulated u/s 2(28A) "interest" means interest payable in any manner in respect of any money borrowed or debt incurred (including deposit, claim or other similar rights or obligation) and included any

and there is no requirement to deduct TDS from payment of interest to any Bank.