10 May 2014
nbfc co has borrowed money @12% in the year 2011 has regularly paid interest and deposited tds. Now lender wants to reduce the rate of interest to 10% retrospectively from year 2011 upto 31st march 2014.please suggest in accounting effect or otherwise in the accounts and TDS.
10 May 2014
no need to give retrospective impact. consider the reversal as an one time impact in the books. with regards to TDS there is nothing to be done from the NBFC side.
12 May 2014
Sir, Thanks.I would like to have further clarity. 1)Can i treat this as an extraordinary income in current year as per AS-5. 2)If i do this then i dont pay interest to the lender in the current year, as i have already paid him excess in previous years. This means no interest,no tds deduction in current year. Is this possible?By doing this i am not contravening any tds provisions?
13 May 2014
depends on how The NBFC structures this interest reduction. If it simply credits your account/refund the money, then it can be treated as an extra-ordinary item. In such a scenario, interest shall still be payable for next year and TDS provisions shall apply.
In case, the bank decides to adjust against the future interest liabilities, then you might just pass it off as no-interest paid position.
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