Tds

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

04 May 2012 We finance Loan to business people and they pay EMI, whether we need to show TDS portion separately in EMI, so that customer can deduct TDS and pay,

Amol Gopal Kabra (CA,CS,DISA)

Amol Gopal Kabra (CA,CS,DISA) (Expert)
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04 May 2012 Whether you are a NBFC? If yes, then customer need not deduct tax. In case, you are not a NBFC company, then its the responsibility of the customers to check whether TDS is applicable for them or not. You need not bifurcate anything for them.

Querist : Anonymous

Querist : Anonymous (Querist)

04 May 2012 thanks amol, we are NBFC could you quote the relevant section for me to read and understand better.

Querist : Anonymous

Querist : Anonymous (Querist)

04 May 2012 thanks amol, we are NBFC could you quote the relevant section for me to read and understand better.

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
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27 July 2025 Got it! You're an NBFC (Non-Banking Financial Company) financing loans to business people who pay EMIs, and you want to know if you need to show the TDS portion separately in the EMI statement so customers can deduct TDS.

Here’s a detailed explanation for you:

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### 1. **Is TDS Deductible on EMI Paid to NBFCs?**

* When a business takes a loan and pays interest, the borrower may need to deduct TDS on the **interest component** of the EMI, **not on the principal repayment**.
* For NBFCs, the TDS deduction rules depend on the **nature of the transaction** and the **section of the Income Tax Act** applicable.

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### 2. **Relevant Sections for TDS on Interest Paid to NBFCs**

* **Section 194A**: TDS on Interest other than Interest on Securities

* If the borrower is making payments of interest to NBFC, TDS under Section 194A applies at 10% (for resident payees).
* However, if the total interest payment in a year is below ₹5,000 (threshold limit), TDS need not be deducted.
* **Section 194LC and 194LD**: Apply for interest paid on foreign loans or certain specified securities and may not be relevant here.
* **Section 194-I**: Relates to rent, not interest.

Since you are an NBFC, your customers who are borrowers should deduct TDS on the interest portion of the EMI, **if applicable**.

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### 3. **Does the NBFC Need to Show TDS Separately in EMI Statement?**

* Generally, **EMI includes principal + interest**.
* The **borrower is responsible for deducting TDS only on the interest component**, not the entire EMI.
* The NBFC **does not need to separately bifurcate or show TDS in the EMI statement**, but it is a good practice to show the interest component separately on the statement or schedule to help the borrower.
* Ultimately, the borrower must decide whether TDS applies and how to deduct it.

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### 4. **Practical Recommendation**

* Provide your customers with a **breakup of principal and interest** paid in each EMI or annually.
* This helps borrowers know how much interest they paid and decide TDS deduction accordingly.
* Quote the relevant TDS section in your communication for transparency.

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### 5. **Key Reference**

* **Section 194A of the Income Tax Act**: [Deduction of Tax at Source on Interest other than Interest on Securities](https://www.incometaxindia.gov.in/pages/acts/income-tax-act.aspx)

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### Summary for You

| Question | Answer |
| ------------------------------------------------- | ------------------------------------------------------------ |
| Are NBFC customers required to deduct TDS on EMI? | TDS applicable only on interest portion, if above threshold. |
| Should NBFC show TDS portion separately? | Not mandatory but recommended to show interest separately. |
| Relevant section to refer? | Section 194A of Income Tax Act |

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