TDS on Processing fees and other charges paid to NBFC's for Borrowing Loan

This query is : Resolved

SIDDHARTH MAHESHKUMAR SHAH (Querist)
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03 September 2024 Is TDS applicable on Processing fees and other charges (Documentation Charges, Visit Charges, etc) paid to NBFC's for Borrowing Loan. If yes under which section and rate of TDS please inform.

Sowmya.G

Sowmya.G (Expert)
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04 September 2024 Processing fees and other charges paid to NBFC shall be tax deducted under section 194J if it exceeds the threshold limit of Rs 30,000 in a year. TDS u/s 194A can also be adopted since section 2(28A) definition of interest includes service fee or other charges in respect of money's borrowed. And 194A applies to a NBFC. But processing charges cannot be clearly evident from adopting 194A. Prima facie any one would think it is an interest payment. To avoid controversies, it is best to adopt Section 194J. But if you are a company or individual/firm falling under tax audit category, you can deduct TDS u/s 194A on processing charges along with the interest payments to the NBFC during the year. NBFCs are not excluded from TDS on interest.