Regarding tds on interest paid to a friend

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Querist : Anonymous

Querist : Anonymous (Querist)

21 April 2012 Sir,

I have taken Money from my Friend and Used in my business and I am not booking any expenditure regarding the interest paid to my friend instead I am drawing from the business and paying off the interest amount personally to him by showing it as drawings in my books of account of my business. I am showing the Loan amount taken from my friend under unsecured loans but not claiming any interest expenses. Am I liable to deduct TDS for the interest paid to my friend personally without booking any interest expenses in the business??????

Please help me out in this Issue...
Thanks IN ADVANCE

CA Dileep Surya Kumar

CA Dileep Surya Kumar (Expert)
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21 April 2012 There is no connection between booking interest as an expense in the business and TDS on interest other than interest on securities 194A(except if interest is booked and no TDS deduction is made and deposited on or before filing of ROI,in such case the same is disallowed under section 40(a)(ia).

You need to deduct TDS @ 10% u/s 194A,if the amount exceeds rs.5000 in F.Y.

For Individuals/Huf tds provisions are applcable only those persons having turn over above 60 lakhs in case of business ,10 lakhs in case of professionals.

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Querist : Anonymous

Querist : Anonymous (Querist)

24 April 2012 Could u please refer the section for this?????

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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20 July 2025 Sure! Here's the relevant section and explanation for your query:

Section 194A of the Income Tax Act deals with TDS on interest other than interest on securities.
As per Section 194A, any person (including individuals) who pays interest (other than on securities) is required to deduct TDS at 10% if the interest amount paid exceeds Rs. 5,000 in a financial year.
However, for individuals/HUFs, TDS provisions apply only if their business turnover exceeds Rs. 60 lakhs or professional receipts exceed Rs. 10 lakhs during the previous year. If turnover is below these limits, TDS deduction is generally not applicable.
In your case:

Since the interest is paid to your friend personally (not as part of the business expense), and you are not booking it as a business expense, TDS on interest should still be deducted by you if you fall under the threshold conditions above.
If you are an individual with business turnover below Rs. 60 lakhs, you are not required to deduct TDS on interest payments to your friend.
But if turnover is above Rs. 60 lakhs, then you must deduct TDS @ 10% on interest paid over Rs. 5,000.

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