23 July 2012
Say a person A has given Loan of Rs. 10 Lacs to a Firm - XYZ , at 15 % p.a. XYZ pays the entire amount of Interest , i.e. Rs. 1.5 Lacs every year to person A . That is , it does not deduct TDS from the interest before paying it to A .
In this case , who would be penalized for the Error of the TDS not being deducted from the Interest - Person A or XYZ ? Would person A be penalized in any way ?
23 July 2012
Who is paying the interest is need to deduct the TDS. if not deducted,the payer will be penalised. your case Firm -XYZ need to deduct TDS before payment or credit of interest, if not the penalty attracts the firm only
23 July 2012
TDS payment deduct & Payment liability is on the person who taken loan. in your case liability of TDS deduct and payment on XYZ firm and they will liable for penalty also not Mr. A.
23 July 2012
U/s 201(1) person who is responsible to deduct tax at source and fails to deduct or after deducting fails to pay the whole or part of the tax as per law will be deemed to be Assessee in default.. here interest is payable by XYZ firm so responsibility to deduct tax is with XYZ. as XYZ didnt deducted TDS XYZ is deemed to be assessee in default and Assessing offer can levy interest or penalty on XYZ.
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