Tax payable on Loan provided by Holding Company

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Vijay Kumar (Querist)
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24 February 2011 Dear Expert,

If the Holding company lends a loan to Subsidiary company and Subsidiary company pays interest to the Holding company. What kind of tax will be involved under which section it applies and what is the rate of Tax

Please do needful.

Thanks & regards,

Vijay

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
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24 February 2011 It will be "Interest other than Interest on Securities". The Interest paying company has to deduct TDS @ 10% in respect of Interest payable to the holding Company in case interest amount exceeds Rs 5000/-. Section 194A will be applicable in this case.

Vijay Kumar

Vijay Kumar (Querist)
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25 February 2011 Dear Expert,

Thank you for providing information. I have for got to specify that here that Holding Company is a Foreign Company - Mauritius Country and Subsidiary Company is an Indian Company.

Now could you please provide your advice on Tax part involved on Interest payment on Loan by Subsidiary Company to Holding Company.

Thanks and regards,

V B Vijay Kumar.

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