Tds on loan prepayment charges

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brijendra sisodiya (Querist)
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13 June 2014 Sir, Our Company goes for prepayment of loan taken from another Company (NBFC) against which security deposit amt will get released by lender. The net effect is receivable to us. but lender has not considered TDS on prepayment charges charged by him so we received lesser Amount and they told us that TDS is not applicable because prepayment charges is not come under professional fees nor as interest.

So please clarify whether Prepayment charges under above scenario will be subject to TDS Or Not ?

Nikhil Kaushik

Nikhil Kaushik (Expert)
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13 June 2014 please note that prepayment charges are covered under interest.
please refer section 2(28A)

"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 ;]"

prepayment charges should be covered under service fee/other charges.

brijendra sisodiya

brijendra sisodiya (Querist)
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13 June 2014 Thanks you very much Sir, for your prompt response and very precise interpretation

thanks again..

Nikhil Kaushik

Nikhil Kaushik (Expert)
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13 June 2014 you are welcome Brijendra....

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