Tds on housing loan interest

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This query is : Resolved

j naga bhargav bommidala (Querist)

25 November 2014 Is TDS is to be deducted where an assesseis under Tax audit and taken a housing loan from private institutions.

Ganeshbabu K

Ganeshbabu K (Expert)

25 November 2014 Yes TDS is mandatory on payment of interest to other than banks
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hence u need to disallow the same if TDS not done

j naga bhargav bommidala

j naga bhargav bommidala (Querist)

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.

Aashok Kumar Sharma online

Aashok Kumar Sharma

(Expert)

27 July 2025 Here’s the breakdown regarding **TDS on housing loan interest** under tax audit:

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### 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.

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### 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 |

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### 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.

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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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