Tds on foreclosure charges

26 September 2016

DEAR MEMBERS,

GUD MORNING EVERYONE,

PLEASE SOMEONE TELL ME, IF TDS IS REQUIRED TO BE DEDUCTED ON FORECLOSURE CHARGES AND LOAN PROCESSING CHARGES PAID TO NBFC U/S 194J OR ANY OTHER SECTION?

THANKS & REGARDS

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5 Replies

CA Harshal Totla (Chartered Accountant) (2224 Points)
Replied 26 September 2016

First of all a very nice question is raised.
As defined u/s 2(28A)"interest" includes any service fee or other charges in respect of moneys borrowed or debt incurred or in respect of credit facility which has not been utilised;
as per above definition processing charges and foreclosure charges are part of interest hence TDS will be dedutible as per sec 194A.
In case payment is to a bank same is exempt as per sec 194A (3).
In case payment is to NBFC TDS is deductible u/s 194A

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CA SUKSHAM ARORA (CA) (569 Points)
Replied 26 September 2016

BUT DOES FORECLOSURE CHARGES COME UNDER DEFINATION OF INTEREST AS IT IS PAID TO REPAY LOAN EARLY INSTEAD OF RAISING A LOAN

CA Harshal Totla (Chartered Accountant) (2224 Points)
Replied 26 September 2016

The definition very well covers your doubt. Please go through it

Pratik Jain (ARTICLESHIP) (40 Points)
Replied 16 September 2017

only payment made by individuals and HUF not covered under tax audit need not deduct TDS rest all needs to deuct even if the force closures charges are to be paid to the bank?

please correct me if i am wrong with relevant section

Thanks in Advance

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