TDS on INTEREST paid to Creditors

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This discussion clarifies whether Tax Deducted at Source (TDS) is required on interest paid to creditors for delayed payments. The consensus is that such interest, charged on average due balances and invoiced with GST, does not typically fall under the definition of 'interest' as per Section 194A of the Income Tax Act, 1961. Therefore, TDS deduction is generally not applicable in these specific scenarios.

RAMDEVA RAM JYANI

RAMDEVA RAM JYANI (Querist)

27 April 2020 Dear Sir
one of my creditor charge interest on average Due balance and send a GST invoice and charge gst as applicable on such goods. (like 5%).
i want to know that TDS is required to Deduct and what rate
thanks

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)

27 April 2020 No need to deduct income tax since such interest will not partake the nature and character of interest, as contemplated in section 194A, r.w.s.2(28A) of the Income tax Act,1961.

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KAVIRAJA ADDANGADI

KAVIRAJA ADDANGADI (Expert)

27 April 2020 Above case tds not applicable since interest paid to delayed payment not falls under TDS provisions u/s 194A.

Delayed purchase payments will not be regarded interest as defined in sec 2(28A)

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CA Jitendra Daraji

CA Jitendra Daraji (Expert)

27 April 2020 In your case no need to deduct TDS since such interest will not falls under TDS provisions under section 194A of the Income tax Act, 1961.

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