Tds on lic loan

TDS not applicable on interest payment to LIC

why? any reference???????????????????????????????

Dear Chirag

Kindly refer to section 194A which clearly says that no TDS has to be deducted on Interest paid/payable to banks, Financial corporation, LIC, Other insurance companies, UTI and other notified institutions.

I hope this resolves your query.

regards

No tax shall be deducted in the following cases –

1. Where the payee is –

• Any banking company/ co-operative land mortgage bank.
• Any financial corporation
• LIC / UTI
• Any company or society carrying on insurance business
• Any other notified institution

1. Where the firm pays interest to its members
2. Where a co-operative society pays interest to its members
3. Where a co-operative society pays interest to another society
4. Interest on notified deposit schemes of Post office, some notified deposits schemes are –

   PO RT A/c, PO time deposit A/c PO MIS, KVP, JVP, NSC

Note: The Senior Citizen Scheme is not notified under this list. Hence TDS shall be necessary. Where a bank or a co-operative bank pays or credits interest on deposits other than time deposits.View Form 26AS TDS Deduction Status Online

Note:

1. If a bank / co-operative bank pay interest on time- deposit, TDS shall be necessary. Here tie deposit means deposit (other than recurring deposits) repayable on expiry of fixed periods.
2. Where a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank pays or credits interest on deposits.
3. Where interest is paid or credited by the central Govt. under different provisions of direct taxes.
4. Where interest is paid on compensation amount awarded by the Motor accidents claims tribunal provided the amount of interest during a financial year does not exceed Rs. 50,000/-
5. Interest payable on Zero coupon Bonds
6. Interest payable by a offshore Banking unit (OBU) to NOR on deposits or Borrowings
7. In all other cases, if the total amount of interest payable during financial year does not exceed the prescribed limit, as discussed below:

If the payer is (i) a bank, (ii) a co-operative bank, (iii) post office — 10,000/-

If the payer is any other person – 5,000/-

Note: If the payer is bank / co-operative bank / housing finance company, the exemption limit of Rs. 10000 or 50000 shall be applied separately to each branch of payer.

Adjustment of excess / deficiency:

The payer can increase or reduce of amount of TDS so as to adjust previous excess / short deduction during the same year.

Read sec 194A as commented above before writing 10K n 5K. Question was whether tds is applicable on interest payment to LIC and it is not applicable.

One of my client is into construction industry, they availed loan on stock from LIC HFL and they have deducted TDS on interest payment.

Is TDS attracting or not?