Query on TDS

This query is : Resolved

Pankaj Jhawar (Querist)
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22 June 2010 There was a agreement with a contractor wherein if we fail to make the payment on a specified date we have to make them the delay payment charges @2% per month.

We are now making the payment along with the interest, please guide me whether the same will be booked as interest in my book or as payment to contractor so that correct TDS is deducted on the interest amount. Please reply with reasons

CA CS CIMA Prakash Somani

CA CS CIMA Prakash Somani (Expert)
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22 June 2010 The penalty amount should be shown seperatly as it is not allowed as expense. IF you club it with interest amount it will not be legal :) though you can do so to avoid tax liability

CMA Ramesh Krishnan

CMA Ramesh Krishnan (Expert)
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22 June 2010 You need to book as Interest only and Interest payment after deducting the TDS need to make to contractor

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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22 June 2010 Interest paid to contractor for delay payment should be shown seprately as interst - Other. No TDS will be deducted on this .

Pankaj Jhawar

Pankaj Jhawar (Querist)
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22 June 2010 Mr. Bansal why TDS on the same will not be deducted?

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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22 June 2010 TDS will be deducted on Contractual amount regarding sevices. Interst is penal nature which is due to non-payment in time.
Hence TDS will not deducted on it.

Other's experts views are solicited.

Pankaj Jhawar

Pankaj Jhawar (Querist)
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22 June 2010 Though it is penal but the same is allowed as a deduction in Income Tax but if TDS is not deducted on interest amount the same may be disallowed???

CA Sanat Pyne

CA Sanat Pyne (Expert)
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22 June 2010 REQUEST SEPERATE BILL FOR INTEREST. OTHERWISE TDS WILL BE DEDUCTED ON HIGHER RATE i,e. 194I OR 194C

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