Tds on housing loan interest
This query is : Resolved
25 November 2014
Is TDS is to be deducted where an assesseis under Tax audit and taken a housing loan from private institutions.
25 November 2014
Yes TDS is mandatory on payment of interest to other than banks
.
.
hence u need to disallow the same if TDS not done
.
.
hence u need to disallow the same if TDS not done
25 November 2014
Boss,
Iam not at all taking interest as expense in P&L Account.It is just relates to capital account.But as in audit report whether it is to be mentioned or not.
With Regards,
B.J.N.Bhargav.
Iam not at all taking interest as expense in P&L Account.It is just relates to capital account.But as in audit report whether it is to be mentioned or not.
With Regards,
B.J.N.Bhargav.
27 July 2025
Here’s the breakdown regarding **TDS on housing loan interest** under tax audit:
---
### 1. **Is TDS required on housing loan interest paid to private institutions?**
* **Yes**, TDS under **Section 194A** is required to be deducted if interest is paid to entities **other than banks or specified financial institutions**.
* The threshold limit for deduction is **₹50,000** in a financial year.
### 2. **What if TDS is not deducted?**
* Under **tax audit**, non-deduction of TDS where applicable may lead to disallowance of interest expense under **Section 40(a)(ia)**.
* So, even if the interest is a capital expense (part of cost of asset, not P\&L), the tax auditor may require TDS compliance and mention non-compliance in the audit report.
### 3. **Interest as Capital Account vs. Expense Account**
* Interest paid on housing loan for self-occupied property or investment property is often capitalized and forms part of the cost of the property.
* However, **TDS provisions apply regardless of accounting treatment**.
* For audit and tax compliance, **TDS deduction and deposit is mandatory** if threshold is crossed.
---
### Summary:
| Aspect | Position |
| ----------------------- | --------------------------------------------- |
| Interest paid to banks | No TDS required |
| Interest paid to others | TDS @ 10% if interest exceeds ₹50,000/year |
| Tax audit treatment | Non-deduction of TDS may lead to disallowance |
| Capitalized interest | TDS provisions still apply |
---
### Suggestion:
* Ensure TDS is deducted & deposited timely.
* In audit report, mention compliance or non-compliance.
* If not deducted, be ready for disallowance and related disclosures.
---
If you want, I can help you draft a note for your tax auditor or prepare a checklist for TDS compliance on housing loans. Would you like that?
---
### 1. **Is TDS required on housing loan interest paid to private institutions?**
* **Yes**, TDS under **Section 194A** is required to be deducted if interest is paid to entities **other than banks or specified financial institutions**.
* The threshold limit for deduction is **₹50,000** in a financial year.
### 2. **What if TDS is not deducted?**
* Under **tax audit**, non-deduction of TDS where applicable may lead to disallowance of interest expense under **Section 40(a)(ia)**.
* So, even if the interest is a capital expense (part of cost of asset, not P\&L), the tax auditor may require TDS compliance and mention non-compliance in the audit report.
### 3. **Interest as Capital Account vs. Expense Account**
* Interest paid on housing loan for self-occupied property or investment property is often capitalized and forms part of the cost of the property.
* However, **TDS provisions apply regardless of accounting treatment**.
* For audit and tax compliance, **TDS deduction and deposit is mandatory** if threshold is crossed.
---
### Summary:
| Aspect | Position |
| ----------------------- | --------------------------------------------- |
| Interest paid to banks | No TDS required |
| Interest paid to others | TDS @ 10% if interest exceeds ₹50,000/year |
| Tax audit treatment | Non-deduction of TDS may lead to disallowance |
| Capitalized interest | TDS provisions still apply |
---
### Suggestion:
* Ensure TDS is deducted & deposited timely.
* In audit report, mention compliance or non-compliance.
* If not deducted, be ready for disallowance and related disclosures.
---
If you want, I can help you draft a note for your tax auditor or prepare a checklist for TDS compliance on housing loans. Would you like that?
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