Tds
This query is : Resolved
31 January 2013
Mr. A has proprietary concern ABC which is covered by section 44AB and has taken loans from various parties. During the FY 2012-13 ABC has has paid Interest on these loans on which tax has been deducted at source.But he also has loans in his personal capacity and he has not deducted tax at source on it.whether he was liable to deduct tax at source?
04 February 2013
Eshwar, PAN and TAN may be taken in the name of the Proprietor A. He may have any no. of business in his name as proprietorship. So he is liable to deduct tax on all heads deductible under IT Act. Hence he has to deduct TDS on interest paid on his personal capacity other than ABC concern also. please Wait for other Experts reply also.
04 February 2013
Sir,
assessee says that if interest income earned in personal capacity is shown as INCOME FROM OTHER SOURCES and deduction is claimed for interest expense in personal capacity then the TDS provisions can be avoided...but when read the provisions of section 194A no such clarity could be acjieved...but section 194C specifically mentions that contract expenses in personal capacity do not attract tds provisions
assessee says that if interest income earned in personal capacity is shown as INCOME FROM OTHER SOURCES and deduction is claimed for interest expense in personal capacity then the TDS provisions can be avoided...but when read the provisions of section 194A no such clarity could be acjieved...but section 194C specifically mentions that contract expenses in personal capacity do not attract tds provisions
27 July 2025
This is an interesting and somewhat nuanced issue. Let me break it down for you:
---
### Context:
* Mr. A runs a **proprietorship business ABC** (covered under **Section 44AB audit**).
* He has taken loans for **business purposes** (ABC) and deducted TDS on interest paid.
* But he also has loans in **personal capacity** and **has not deducted TDS** on interest paid there.
---
### Question:
**Is Mr. A liable to deduct TDS on interest paid on loans taken in his personal capacity?**
---
### Relevant Provisions:
1. **Section 194A — TDS on Interest other than Interest on Securities:**
* Applies to **any person responsible for paying interest (other than interest on securities)** exceeding Rs 5,000 in a financial year.
* The payer must deduct TDS at 10% (currently).
* This applies whether interest is paid by an individual, firm, or company.
2. **Applicability on Personal vs Business Loans:**
* **For business loans** (used for business), TDS provisions clearly apply since business is a separate entity for tax purposes even if proprietorship.
* **For personal loans** (taken by Mr. A in his personal capacity), the question is whether Section 194A applies to an individual paying interest.
3. **Whether Individual is Covered Under Section 194A:**
* Section 194A **applies to all payers of interest**, including individuals.
* **But individuals and HUFs are exempted from deducting TDS if the interest amount does not exceed Rs 50,000 in a financial year (limit may vary from time to time).**
* So if Mr. A is paying interest on personal loans and the total interest exceeds threshold (Rs 50,000), TDS is applicable.
4. **Interaction between Proprietorship and Personal Capacity:**
* Although business and personal finances are separate for accounting, **the taxpayer is the same person.**
* For TDS purposes, if the loan is in **personal capacity**, Mr. A as an individual **is responsible to deduct TDS on interest paid exceeding threshold.**
5. **Difference with Section 194C:**
* Section 194C deals with contracts and is **specific about personal capacity exclusion** for contract payments.
* Section 194A does **not** explicitly exclude personal capacity loans.
* So the exemption in 194C does **not** apply to 194A.
---
### **Conclusion:**
* Mr. A **should deduct TDS under Section 194A on interest paid on loans taken in personal capacity** if the interest paid in a financial year exceeds the prescribed threshold (Rs 50,000).
* Deducting TDS on business loans is mandatory.
* Not deducting TDS on personal loans (above threshold) can attract penalty and interest under the Income Tax Act.
---
If you want, I can help you draft a detailed explanation or a note for your management or tax advisor on this matter.
Would you like that?
---
### Context:
* Mr. A runs a **proprietorship business ABC** (covered under **Section 44AB audit**).
* He has taken loans for **business purposes** (ABC) and deducted TDS on interest paid.
* But he also has loans in **personal capacity** and **has not deducted TDS** on interest paid there.
---
### Question:
**Is Mr. A liable to deduct TDS on interest paid on loans taken in his personal capacity?**
---
### Relevant Provisions:
1. **Section 194A — TDS on Interest other than Interest on Securities:**
* Applies to **any person responsible for paying interest (other than interest on securities)** exceeding Rs 5,000 in a financial year.
* The payer must deduct TDS at 10% (currently).
* This applies whether interest is paid by an individual, firm, or company.
2. **Applicability on Personal vs Business Loans:**
* **For business loans** (used for business), TDS provisions clearly apply since business is a separate entity for tax purposes even if proprietorship.
* **For personal loans** (taken by Mr. A in his personal capacity), the question is whether Section 194A applies to an individual paying interest.
3. **Whether Individual is Covered Under Section 194A:**
* Section 194A **applies to all payers of interest**, including individuals.
* **But individuals and HUFs are exempted from deducting TDS if the interest amount does not exceed Rs 50,000 in a financial year (limit may vary from time to time).**
* So if Mr. A is paying interest on personal loans and the total interest exceeds threshold (Rs 50,000), TDS is applicable.
4. **Interaction between Proprietorship and Personal Capacity:**
* Although business and personal finances are separate for accounting, **the taxpayer is the same person.**
* For TDS purposes, if the loan is in **personal capacity**, Mr. A as an individual **is responsible to deduct TDS on interest paid exceeding threshold.**
5. **Difference with Section 194C:**
* Section 194C deals with contracts and is **specific about personal capacity exclusion** for contract payments.
* Section 194A does **not** explicitly exclude personal capacity loans.
* So the exemption in 194C does **not** apply to 194A.
---
### **Conclusion:**
* Mr. A **should deduct TDS under Section 194A on interest paid on loans taken in personal capacity** if the interest paid in a financial year exceeds the prescribed threshold (Rs 50,000).
* Deducting TDS on business loans is mandatory.
* Not deducting TDS on personal loans (above threshold) can attract penalty and interest under the Income Tax Act.
---
If you want, I can help you draft a detailed explanation or a note for your management or tax advisor on this matter.
Would you like that?
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