TDS ON FINANCE CHARGES

This query is : Resolved

PLV SUBRAHMANYAM (Querist)
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05 May 2009 WHETHER TDS IS TO BE MADE FROM THE FINANCE CHARGES PAID TO A VEHICLE FINANCE COMPANY UNDER HIRE PURACHASE AGREEMENT.

CA Sanjeev Kr Jain

CA Sanjeev Kr Jain (Expert)
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06 May 2009 tds is deductible if financer is NBFC

taxindiaconnect

taxindiaconnect (Expert)
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06 May 2009 The definition of Interest has been provided in section 2(28A) of the Income tax Act as following .

"interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised;

According to this definition the interest includes means any charge for credit facility.

As per section 194A(3)(iii) of Income tax act the TDS is not required to be deducted from the payment or credit made to a banking company engaged in the banking business. Thus no TDS is required to be deducted from it while making payment to a banking company.

Howerver the if the payment is being made to a company which is not a banking company TDS is required to be deducted.

O.D.SHARMA

O.D.SHARMA (Expert)
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06 May 2009 No,In case of financial charges but if this is in shape of fee,Then yes.being financial charges are in nature of exp.not contractual payment.I opine no tDS.

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