08 May 2013
As a finance company, in their business of Bill discounting,making payment to the vendors for Rs. 98/- against bill of Rs. 100/- and collecting Rs. 100/- from the client.
Below is the scheme of entries in books of finance company:
Loan A/c (Asset) - Rs. 100/- Dr. Bank A/c - Rs. 98/- Cr. Upfront interest(income)- Rs. 2/- Cr.
Please advise whether vendor has to deduct TDS on discounting charges of Rs. 2/- or not.
Secondly, this is called interest of discounting charges income in books of lendor.