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Tds on interest paid to minor

TDS 3640 views 2 replies

XYZ is a proprietory firm and Mr. X is proprietor. Y is minor child of Mr. X. Mr. X has taken loan from Y on which Mr. X is paying interest more than Rs. 5000/-. TDS is applicable to XYZ and therefore Mr. X is required to deduct tds on interest exp. The income of Y is going to be clubbed with and charged for income tax to Mr. X.

Whether Mr. X should deduct tax at source or not?

If Yes, then whose PAN should be qouted in the return of tds. As the tax on such income will be charged to Mr. X, should I qoute PAN of Mr. X rather than that of Y?

If I do so then it will be like this that Mr. X is deducting tax by qouting his TAN as deductor and his own PAN as deductee which is already included in deductor's information.

And if NO, then how Mr. X will be eligible to get the credit of such tds while clubbing such minor's income as the same will not beavailable in Mr. X's 26AS?

Please reply.....

Replies (2)

I think the problem lies with the minor giving a loan.

I recommend you that you ask in the LAW section of this forum, that whether a minor or his guardian, on behalf of minor, can grant a loan to someone or not.

In my opinion a minor cannot grant loan.

scavanger007 is right, the problem is in, whether a minor can give loan.

Income tax act is silent about that.

But in income tax any one can apply for PAN, even a minor also.

And it's a duty of person to deduct TDS at the time of making payment.

So Mr X is liable to deduct TDS at the prsecribed rate, and if minor has no PAN, then at maximum rate.

Now question of Aggreagation on income, under the law, income or loss of a person  is aggreagated in the income of other person. But nothing is said about the, TDS deducted is also clubbed.

Hence it may assumed that the provisions are also applicable to the TDS deductions.

Hence Mr X is eligible for the benefit of the clubbing of income and tds deducted.

ohter question may arise, Both are relatives.

 

But the main question still presist, whether the minor can enter in an agreement to give loan .

Scavanger007

Read more at: /forum/tds-on-interest-paid-to-minor-248327.asp


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