TDS on interest from partner (last year in audit) to firm

This query is : Resolved

niemesh (Querist)
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19 March 2008 Dear Members

Please guide me in the following matter

The books of account of assessee named ‘A’ (Individual) were under audit u/s 44AB in ASST YR 2006-07. He was also partner in a firm say ‘B’ and his account in the firm was overdrawn during ASST yr. 2007-08 and ‘A’ paid interest Rs. 1,30,000/- to the firm ‘B’.

So, my query is whether ‘A’ is liable to deduct Tax at source on the interest payment to the firm in which he is also a partner? And if ‘A’ has not deducted tax at source then the interest amount is liable to disallowance as expenses?

Please guide….

CA Hemant T Dewani

CA Hemant T Dewani (Expert)
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19 March 2008 if interest is debited in your a/c in the firms books and also you will intraduce
your capital in the firm rs 130000/- and you will pay interest to firm then tds provision is not applicable to you

Late CA Sampat Jain

Late CA Sampat Jain (Expert)
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19 March 2008 TDS is to be made by an individual on interst paid if his accounts were under audit u/s 44AB in the last year .

However a partnership firm is not required to make TDS on interest paid to partner u/s 194A(3)(iv) which exempts from TDS "to such income credited or paid by a firm to a partner of the firm "

AS SUCH INTEREST PAID BY PARTNER TO THE FIRM IS NOT EXEMPTED FROM TDS IN YOUR CASE

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