Tds
This query is : Resolved
Rashesh Shah
(Querist)
19 March 2014
If company is proprietor firm, & take loan in personal account, so, TDS deduction is applicable on loan or not ?
Rajagopalakrishnan R
(Expert)
19 March 2014
Your Question is not clear at all
Rashesh Shah
(Querist)
20 March 2014
I means,
If Mr. A is proprietor of company name of xyz co. & if xyz co.'s bank account in icici bank & Mr. A's bank account in HDFC. Now, Mr. A loan received as unsecured in his personal HDFC bank account. Now , Mr. A give intrest on loan. So, TDS is applicable for deduct against Intrest or not.
If Mr. A is proprietor of company name of xyz co. & if xyz co.'s bank account in icici bank & Mr. A's bank account in HDFC. Now, Mr. A loan received as unsecured in his personal HDFC bank account. Now , Mr. A give intrest on loan. So, TDS is applicable for deduct against Intrest or not.
27 July 2025
Got it! Here’s the clarification:
* If **Mr. A** (the proprietor) **lends money to his own firm (xyz co.) from his personal account**, and the firm pays **interest to Mr. A** on that loan, then:
### Is TDS applicable on interest paid by the firm to Mr. A (proprietor)?
**No, TDS is not applicable in this case** because:
* The payment is between a **proprietor and his own business (proprietorship firm)** — the firm and the proprietor are not separate legal entities.
* As per Income Tax rules, interest paid to the proprietor on capital or loans given by the proprietor to the firm is **not treated as an income liable for TDS deduction** by the firm.
### Key points:
* The interest paid by the firm to Mr. A is **income in the hands of Mr. A** and will be taxed in his personal income tax return.
* The firm does **not deduct TDS** on interest paid to the proprietor’s personal loan.
---
### Summary:
| Situation | Is TDS Deductible? |
| ------------------------------------------------------- | ------------------------ |
| Interest paid by firm to proprietor on personal loan | **No** |
| Interest paid by company to third party (banks, others) | Yes (under Section 194A) |
---
Let me know if you want any sample journal entries or further explanation!
* If **Mr. A** (the proprietor) **lends money to his own firm (xyz co.) from his personal account**, and the firm pays **interest to Mr. A** on that loan, then:
### Is TDS applicable on interest paid by the firm to Mr. A (proprietor)?
**No, TDS is not applicable in this case** because:
* The payment is between a **proprietor and his own business (proprietorship firm)** — the firm and the proprietor are not separate legal entities.
* As per Income Tax rules, interest paid to the proprietor on capital or loans given by the proprietor to the firm is **not treated as an income liable for TDS deduction** by the firm.
### Key points:
* The interest paid by the firm to Mr. A is **income in the hands of Mr. A** and will be taxed in his personal income tax return.
* The firm does **not deduct TDS** on interest paid to the proprietor’s personal loan.
---
### Summary:
| Situation | Is TDS Deductible? |
| ------------------------------------------------------- | ------------------------ |
| Interest paid by firm to proprietor on personal loan | **No** |
| Interest paid by company to third party (banks, others) | Yes (under Section 194A) |
---
Let me know if you want any sample journal entries or further explanation!
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