Tds on car loan emi??

You are right..you are not liable to deduct tds on interest payment to financial company.

Sec 194A(3)(iii) states tht provisions of tax deduction on interest shall not apply to income credited or paid to any banking company  or financial corporation......

Dear Anupreksha,

I m asking about the loan provided by company other than banking company. What should i do in this case..

Example: Suppose Tata Capital or Future Capital (P) Ltd is providing car loan to a private limited company.Then is m i liable to deduct TDS.??

Please quote the section if any int his regard or any circular etc..

Thanks in advance..

Dear Anupreksha,

I m asking about the loan provided by company other than banking company. What should i do in this case..

Example: Suppose Tata Capital or Future Capital (P) Ltd is providing car loan to a private limited company.Then is m i liable to deduct TDS.??

Please quote the section if any int his regard or any circular etc..

Reply soon..

Thanks in advance..

1) Your Car Laon is with financial institution, which is to be treated same as banks, hence TDS is not applicable

2) and furthur you should check first whether the interest amount exceed Rs. 5,000 (Cut Off Limit u/s 194A)

if the amount exceeds Rs. 5000 only then the liability arise to deduct TDS otherwise not.

Dear Mr. Verma, if you have taken car loan from other than Banks n financial corporations than u have to Pay deduct Tax if Intrest is above the specified limit u/s 194A.

but you can not deduct from EMI's, you can do one thing ask the company to Reimburse you the TDS amount. If loan taken from tata capital, reliance capital, bajaj alianz, Indiabulls etc. than this can be done. these companies are not free from TDS deduction.

Agreed with above replies..

If company falls under any category mentioned under sub clauses of Section 194A(3) then you are not liable to deduct tax..in all other cases you are liable to required tax..

Agreed with above replies..

If company falls under any category mentioned under sub clauses of Section 194A(3) then you are not liable to deduct tax..in all other cases you are liable to required tax..

I Agree

Car Rental

If car is purchased by the Proprietor in his own name and introduced the same in his business. And the business is subject to audit under sec 44AB, in that case do the provisions of sec 194A apply on him?  

if any company have taken loan from bank as a capital loan and paid emi than tds is applicabe or not

Tds on interest not applicable if interest is paid to Banking or Financial institutions. Loan may taken borrowed for any reason..

A notice was served from the income tax department middleton row kolkata that a customer taken heavy vehicle commercial loan from NBFC.Customer has not falling under tds to deduct.But tds department sent a notice that why not u have deducted tds on interest paid on emi to nbfc............and cause to produce profit and loss and balance sheet since,2008.Is this true that paying EMI is liable to deduct tds from nbfc and party has to deduct tds from emi pay..............required advice

Many Small and Medium Enterprises (SME) borrow money (unsecured loans) from Non-Banking Financial Companies (NBFC). Whether interest paid on such loan attracts TDS provisions is a question frequently asked by the accountants. Here is the answer.

As per Section 194A of the Income Tax Act, 1961 a business enterprise (proprietary concern covered u/s Section 44AB, company, firm, etc) has to deduct tax (TDS) on the interest payable towards the loan from NBFCs. 

Suppose, you have to pay an annual interest of Rs.1,00,000 to a NBFC (say, Cholamandalam Finance), deduct tax at 10% and deposit to the government account. If it is not done, 30% of interest i.e., Rs.30,000 will be disallowed from your expenditure u/s 40(a) (ia).

In case of EMI, how to deduct Tax?

This is a common problem faced by all companies. As I have already mentioned, the interest is paid as EMI and the company will not have any option of deducting tax and paying the balance interest.

In such cases, the borrower has to pay TDS at the applicable rate (currently it is 10%) and remit it to the government. On quarterly basis, file ETDS return and issue Form 16A to NBFC.

While submitting Form 16A, make a covering letter asking them to refund TDS amount. Maybe with a little perseverance, you will get your money back.

Exemptions from deduction of TDS:

The Income Tax department provides certain exemptions from TDS u/s 194A and some of them are –

• Interest paid on loans from banks, co-operate societies, LIC or Public financial institutions (such as State Finance Corporation), Insurance company or UTI

• Interest paid by the firm to its partners

• If the interest paid during the financial year is less than Rs.5000

Thanks

Jitendra Chattopadhayay - HOD Finance Accounts Department

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