TDS on chit discount

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

30 March 2011 I was subscribed to chit fund run by a private limited company. My concern was subject to Tax audit u/s.44AB. In a particular month I was drawn an amount after deducting a certain discount amount and utilized the same for my business. Whether I need to deduct TDS on this amount as it is in the nature of interest payment on borrowings?

Thanks and Regards
R.Krishnaraj

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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31 March 2011 The discount on amount disbursed by a chit fund company to the members from their contribution is not `interest’with in the meaning of section 2(28A) of the Income tax Act,1961, therefore, the question of deducting any tax at source therefrom would not arise.

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