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TDS on Interest portion

j.bovas (Finance Professional) (53 Points)

31 January 2011

Hi all,

I m from Pvt Ltd company. We are making payment to cotton suppliers on 45 days credit. The party is now requesting us to make a paymetnt before the due date ( advancement of payment).

He agreed that I can deduct the interest cost portion for the advanced days from his total due.

Will this deduction attracts TDS liability?

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8 Replies

Pankaj Arora (Learner) (3134 Points)
Replied 31 January 2011

I don’t think that you can deduct tds on interest because interest is from indirect way that is from purchase.

Dheeraj (Learner) (1100 Points)
Replied 31 January 2011

tds is always deducted on Income

and in ur case, u r saying that u are going to pay amount to suppliers before ur liablity.

i.e there is no any generation of income.

So, as per my opinion, there is no any requirement of TDS deduction

rachit jain (chartered accountant ) (635 Points)
Replied 31 January 2011

its not an interest which you are earning for advance payment for purchase its a discount which you are getting for advance payment. so no tds.

ravitheja (CA Final) (77 Points)
Replied 31 January 2011

there is no need for deducting TDS on interest on late payment of dues

Atul Kumar (working employee) (153 Points)
Replied 31 January 2011

Mr. J

Tds is not applicable on such case because you are making payment for purchase of material and tds is applicable service or contract not on purchase of material but if you are making payment of any interest on such payment then u are liable to deduct tds on interest amount only.

Eswari ( Accounts Executive) (21 Points)
Replied 31 January 2011

If you are getting Interest separately from the party for advance payment , If it is exceeds Rs.5,000/- p.a , they have to deduct tds 10% and to pay the balance .

If ou are not getting any interest from them , no need to worry about it.

Eswari

ashoka r d (senior audit assistant) (82 Points)
Replied 31 January 2011

The point here is the interest or discount is earning by you and when the supplier makes payment towards that interest or discount he has make TDS either under section 194I or 194H depends on whether that income is interest or discount. Finally, the supplier has to make and not you.

PRAVIN (EXECUTIVE-ACCOUNTS) (23 Points)
Replied 01 February 2011

Gm Dear,

You are making the payment to Cotton Suppliers aginst pure material and not labou so it will never attract to deduct T.D.S on it. In your case you are deducting Interest cost portion from his total due which is not liable for deduction of TDS.