Tds on loan

srinivas (accountant) (60 Points)

17 March 2016

SIR WE AVAILED LOAN FROM BAJAJ FINSERY rS 18 LACS,NOW MY AUDITOR SAYS DEDUCT TDS ON INT BUT BAJAJ FINSERY SAYS NO TDS WHAT IS THE PROCEGURE

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CA Chandra Prakash (9873059766 Increasing knowledge through sharing) (296 Points)
Replied 17 March 2016

Ask the reason from bajaj finserve, why are they not allowing you to deduct the tds. Your CA is correct and alternate procedure is very lengthy. u can read alternate solution here https://www.hdtmc.in/?p=8 .

srinivas (accountant) (60 Points)
Replied 17 March 2016

Dear Sir

Thank you for your valuble suggestion

Regards

Srinivas

Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 17 March 2016

First of all you have to confirm whether Bajaj Finserve is a Banking Company as per Banking Regulation act, 1949.(Furthur, I have searched in MCA website about Bajaj Finserve and it is a Public Ltd Company which may be under category of NBFC. So in my opinion,it is not a Banking Company registered under BANKING REGULATION ACT,1949 unless some Grouping of Companies may involve which lead to Complexity, So please confirm this matter on your own). If it is a Banking Company then no need to deduct T.D.S u/s.194A other wise deduct T.D.S @ 10%. Generally if Payee applies for Nil deduction to A.O u/s.197 then A.O will issue certificate directly to you which is valid Payee wise and for Period prescribed there in. So as Chander said, contact Bajaj Finserve and Cofirm the reason for their assertion.

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shantanu (a) (38 Points)
Replied 17 March 2016

I have audited a few companies. Generally NBFCs don't make provision for TDS in their repayment schedule. One thing is sure, it is mandatory to deduct TDS on Intt. paid to NBFCs. So what the companies I have audited do. They have made arrangements with the NBFC. It pays instalments and interest as per repayment schedule (i.e. full amt.). But it also deposits TDS u/s 194A, and when it issues the Form 16 to the NBFC. The NBFC refunds it through a cheque. So this way the provision of the law is also completed. The NBFC also follows its repayment schedule. There is no evasion of tax too. For Eg: i have to pay instalments of 100000 during the year, which includes 20000 intt. I will pay 100000 to NBFC. I will dep TDS @ 10%, ₹2000 u/s 194A. After quarter end when I issue TDS certificate to NBFC, it will repay me ₹2000.

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Swami Ayyappa Nuli (TAX ADVISOR & CONSULTANT AT G.S.T SUVIDHA CENTER) (1372 Points)
Replied 17 March 2016

Actually it leads to unnecessary flow of Working Capital from Deductor Point of View i.e Rs.1Lakh to Creditor on payment date and Rs.2 Thousand to Department by 7th of Next month and Rs.2 Thousand inflow after relevant Quarter inspite of fact that Net receipt for Payee remain same i.e 98,000.(Rs.1Lakh on Paid date and Rs.2 Thousand outflow on submission of Form 16A but not Form 16). If deductor follows regular method then it leads to Outflow of Rs.98,000 on payment date and Rs.2 Thousand to Department by 7th of Next month. So unnecessary flow of Rs.2 Thousand on Payment date and wait till submission of Quarterly Returns for the receipt of the same even with out Interest would be avoided if regular method followed.

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shantanu (a) (38 Points)
Replied 18 March 2016

Yes. Your point is correct. In that case the company can talk and add the specific clause to loan contract. Because the normal contract doesn't have the TDS clause.

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