Tds on commercial loans from finance corporations or banks

612 views

Save Share

Join Us Follow Us Add as Source

Koteswara Rao

Tax Consultantant

42 Points Posted on 25 November 2014

Dear Members,

Namasthe!

The assessee had availed a loan from financial institution for purchase of TATA Hitachi Ex-200. He is paying Rs. 28500/- as EMI. Out of the same the finance corporation charged the interest 2,16,000/- per annum. If the assesse is liable to deduct tax on payment of interest to the finance company?. What is the treatment for Banking comapnies also for the same. Please let me know. and also guide me in this regard. urgent please.

Replies (2)

Aman Aggarwal

Audit & Finance Manager

46 Points Posted on 25 November 2014

Your case in point is covered by section 194A which are TDS provisions for "deduction of tax at source from interest other than interest on securities" whereby aggregate payment of interest during the FY exceeding Rs. 5000 (your case) and Rs. 10000 in other cases requires TDS to be dedcuted at rate of 1%

The above provisions are not applicable in case of payment of interest to :
Banking Companies
Public Finanical institutions (like ICICI, IFCI, IDBI, LIC, UTI, IDFC)

hope this helps

Dipjyoti Majumdar

CA in service & CS. dipmaj@

2874 Points Posted on 26 November 2014

If you have paid interest to NBFCs then you have to deduct tax at source. You cannot change the predetermined EMI. So you pay out of your own pocket and later claim reimbursement from the payee.

Thanks,