TDS on Interest(For Trade advance)

TDS / TCS 1372 views 1 replies

Can any body please help..................!!!!!!!!!!

We had recieved an advance from our client for completing  a service contract.

When the advance was provided it was not said  that any interest will be charged on this amount.

The service was rendered late from the scheduled deadline.

For the delay, the client deucted an amont from our bill stating it as " Interest on advance given"

Whether this interest will come under purview of TDS U/S 194A.????????

Should I have to deposit TDS amount with tax dept. ????????

Replies (1)

Does the service contract state that if service is not completed as per the stipulated time in the contract , interest will be charged ?

If the contract doesnt state that , ask your client to change the contract amount or issue you a debit note mentioning the word discount/penalty , instead of interest .

The words using in 194A are "any person responsible for paying interest" . I dont think such a transaction can be covered by 194A unless the contract specifically mentions anything about interest. Other thing to be kept in mind is how you pass the entry in books of accounts . it is technically a discount /penalty rather than interest .

Also read 194A and 2(28A) for better clarification.


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