Tds deduction on interest on term loan from bank
This query is : Resolved
23 December 2014
Sir please tell me whether tds will be applicable on Interest payable on term loan from bank ?
I have booked for interest payable on term loan but tds not deducted , is it correct entry ?
I have booked for interest payable on term loan but tds not deducted , is it correct entry ?
23 December 2014
Yes correct entry. Interest on loan is covered to TDS u/s 194A of the Income tax Act. However, as per Sec.194A(3)(iii), interest paid to any banking company to which Banking Regulation Act, 1949 applies is not subject to tax deduction.
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24 December 2014
Dear Mr. Sanjay Gupta your treatment is correct but you are misquoting the section 194A.
Section 194A belongs to TDS on interest otherthan Interest on Security which is paid to resident.
In present case Resident (Assume) paid interest to Banking Company.
Therefore, correct section is 196
Section 194A belongs to TDS on interest otherthan Interest on Security which is paid to resident.
In present case Resident (Assume) paid interest to Banking Company.
Therefore, correct section is 196
24 December 2014
Dear Mr. Kumar Mukesh please read Section 194A(3)(iii) & Section 196 both and then say who needs to be corrected.
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29 December 2014
My view is the more relvent section is sec.194A only. Section 194A is considering Interest paying to resident ( Resident may be Banking company also)and sec.194A also have specific clause of interest payment to banking company exempted from TDS deduction.
29 December 2014
Section 194A
Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income 44[by way of interest on securities], shall, at the time of credit of such income to the account of the payee45 or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :
(a) ten thousand rupees, where the payer is a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act);
Analysis: Section, 194A is related when payment MADE BY BANKING Company whereas section 196 is related with payment MADE TO BANKING Companies.
Any person, not being an individual or a Hindu undivided family, who is responsible for paying to a resident any income by way of interest other than income 44[by way of interest on securities], shall, at the time of credit of such income to the account of the payee45 or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force :
(a) ten thousand rupees, where the payer is a banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies (including any bank or banking institution, referred to in section 51 of that Act);
Analysis: Section, 194A is related when payment MADE BY BANKING Company whereas section 196 is related with payment MADE TO BANKING Companies.
29 December 2014
Dear Mr Kumar Mukesh you have made all the analysis but the problem is that even after my request you have not gone through Section 194A(3)(iii). Let me reproduce it below:
194A(3)(iii) The provisions of sub-section (1) shall not apply to such income credited or paid to (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank).
It clearly shows that your analysis is not correct. Exemption from deduction of TDS is granted vide provision contained in Section 194A(3)(iii).
194A(3)(iii) The provisions of sub-section (1) shall not apply to such income credited or paid to (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank).
It clearly shows that your analysis is not correct. Exemption from deduction of TDS is granted vide provision contained in Section 194A(3)(iii).
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29 December 2014
196. Notwithstanding anything contained in the foregoing provisions of this Chapter, no deduction of tax shall be made by any person from any sums payable to—
(i) the Government, or
(ii) the Reserve Bank of India, or
(iii) a corporation established by or under a Central Act which is, under any law for the time being in force, exempt from income-tax on its income, or
(iv) a Mutual Fund specified under clause (23D) of section 10,
where such sum is payable to it by way of interest or dividend in respect of any securities or shares owned by it or in which it has full beneficial interest, or any other income accruing or arising to it.
Your Analysis says Section 196 is related to payment made to banking companies. Please read the section 196 which is produced herein above and state which among (i) to (iv) will include the banking companies. I hope you don't refer to Reserve Bank of India.
Kumar Mukesh Ji do you still think your analysis is correct?
(i) the Government, or
(ii) the Reserve Bank of India, or
(iii) a corporation established by or under a Central Act which is, under any law for the time being in force, exempt from income-tax on its income, or
(iv) a Mutual Fund specified under clause (23D) of section 10,
where such sum is payable to it by way of interest or dividend in respect of any securities or shares owned by it or in which it has full beneficial interest, or any other income accruing or arising to it.
Your Analysis says Section 196 is related to payment made to banking companies. Please read the section 196 which is produced herein above and state which among (i) to (iv) will include the banking companies. I hope you don't refer to Reserve Bank of India.
Kumar Mukesh Ji do you still think your analysis is correct?
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30 December 2014
Dear Mr. Sanjay, you are rightly said that section 194A is more specific than 196.
Thanks
Thanks
02 January 2015
In reply to the PM of Gupta Ji, I too endorse the view that section 194A(3)(iii) applies to the issue raised.
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