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Tds on processing fee for obtaining loan from NBFC

Ramya shree M (CA) (39 Points)

02 July 2018

TDS for processing fee from NBFC- should it be deducted under section 194J or 194A?

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Ruchika Somani (Coaching and Practice in Tax Audit Law) (4429 Points)
Replied 02 July 2018

Originally posted by : Ramya shree M
	TDS for processing fee from NBFC- should it be deducted under section 194J or 194A?

194A

Ramya shree M (CA) (39 Points)
Replied 02 July 2018

can u please explain with the logic. Is it because it is covered under the definition of interest

Ruchika Somani (Coaching and Practice in Tax Audit Law) (4429 Points)
Replied 02 July 2018

Since processing fee is covered under the meaning of interest as defined u/s 2(28A) of the IT Act to my view hence it need no further explanation and no TDS provisions apply if paid to banks.

As per Sec 194A if Interest (which includes Processing fees ) is paid to the banking company regulated by Banking Regulation act, it is exempt from TDS deduction ,but since the NBFCs are not governed by Banking Regulation Act, interest paid to NBFCs is subject to TDS deduction u/s 194A

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Ramya shree M (CA) (39 Points)
Replied 02 July 2018

Thank you so much. So with reference to the particular section mentioned above the same would fall under section 194A.

Ruchika Somani (Coaching and Practice in Tax Audit Law) (4429 Points)
Replied 02 July 2018

Originally posted by : Ramya shree M
	Thank you so much. So with reference to the particular section mentioned above the same would fall under section 194A.

Jee.

Dhirajlal Rambhia (SEO Sai Gr. Hosp.) (195708 Points)
Replied 02 July 2018

Though I agree as above........

But an interesting case law in this chapter....

No disallowance for interest paid to NBFC without TDS deduction....

Shri-Azmath-Ulla-Vs-The-Assistant-Commissioner-of-Income-Tax-ITAT-Bangalore.

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Mayur Narwani (50 Points)
Replied 04 July 2018

If NBFC are Covered in Banking Regulation Act 1949 then TDS not deducted as per IT act, But NBFC is Not Covered under Banking act then you will deduct the TDS (refer sec 194 A)