No tds on loan processing fee paid to nbfc

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prasanna kiran (Querist)

27 August 2019 Hi,

Is there any case law which is supporting the above statement? or any other supporting from Act.
Your response is of great help.

Regards,
Prasanna

Shankit Sharma

Shankit Sharma (Expert)

28 August 2019 TDS u/s 194A is attracted to such interest expense against NBFC loan.

For Deduction of TDS on Processing Fees we have to read the definition of section 2(28A), which is as under-

Definition of Interest u/s 2(28A) – “interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised.

Processing fees to bank is paid after sanction letter is issued but before the disbursement of loan amount. Loan is subject to payment of processing fees. Processing fess is paid to borrow the money and not as compensation after borrowing the money.

Hence Processing Fees is not subject to TDS.!!

Thanks
CA Shankit Sharma
Mob. - +91-9379367736

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