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Interest on Interest???????????

R.V.Raman (Article Clerk) (73 Points)

22 January 2010

Whether any Interest is to be Paid for Non-Payment of Interest???? I mean Interest on Interest (Compunding Interest) --- Ref Section 75.

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11 Replies

CA. ANKUR JAIN (CA.....) (2800 Points)
Replied 22 January 2010

i think No...........

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R.V.Raman (Article Clerk) (73 Points)
Replied 22 January 2010

Hey Ankur,

But if iam not paying interest, means there is a scope for the department to loose revenue on the interest not paid.Whether they can question from that aspect.

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 22 January 2010

Yes, i think after some tenure, it is very much possible that lender may charge interest on non payment of interest....

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 22 January 2010

Hi raman, what interest are u talking about?? Which department??

R.V.Raman (Article Clerk) (73 Points)
Replied 22 January 2010

Whether any provision gives the scope to charge Interest on Interest???? I think in direct taxes too there is no such concept of Compounding interest!

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R.V.Raman (Article Clerk) (73 Points)
Replied 22 January 2010

Dhir, My point of discussion on Service Tax, I mean Interest for delay in payment of Service tax.

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 22 January 2010

Look, even i have never heard or read something like this...

But in one example, i came across with this concept in PCC...

The example was :

Mr. X bought loan of Rs. *****... on which he was suppose to pay Rs. 5000 p.a as interest.... For consecutive 4 years he didnt pay anything... That means, now he was liable to pay principal amount as well as Rs. 20000 as interest at the end of 4th year...

Mr. Y (the lender), continued charging interest at principal amount at same old rate, but also charged Rs. 5000 as interest on UNPAID INTEREST TILL DATE... So, in 5th year, Mr. X has to pay Rs. 30000 as total interest amount (Rs. 25000 interest amount on principal and Rs. 5000 interest on UNPAID INTEREST)., and for the whole of interest amount he was eligibile to get deduction from profit in 5th year...

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 22 January 2010

No...

In case of service tax, i dont think so anyone will charge any interest on non-payment of interest... There's no such provision, anywhere...

P-A-W-A-N (TAX - MANAGER AT GURGAON) (541 Points)
Replied 22 January 2010

Originally posted by : D н ! я σ √
	No... In case of service tax, i dont think so anyone will charge any interest on non-payment of interest... There's no such provision, anywhere...