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Is TDS deduction mandatory

P V Gopal (Job) (127 Points)

26 August 2021

Dear All

Small information required.

Our employer posed to refund some amount to the financier and the interest came more than one lac.

Amount pertaining to this financial year only.

Our accounts department deducted TDS and paid principal along with interest.

Financier saying no TDS deductable and all interest amount without deducting TDS should be paid to them only.

To the best of my knowledge, we need to deduct TDS from interest amount.

Could you please guide me, which is correct.

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3 Replies

Sravan Reddy G (CA) (618 Points)
Replied 26 August 2021

Based on my knowledge, no need to deduct TDS ,

can U pls tell me under which sec. TDS deducted

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Baskar (CMA) (93 Points)
Replied 27 August 2021

Section 194A of the Income Tax Act deals with the provisions relating to deduction of TDS on interest (other than interest on securities).

Any person, other than individual or HUF, who is paying interest (other than interest on securities) to a resident is required to deduct TDS.

Rate of tds is @ 10% and 20 % if PAN not available

TDS is not to be deducted under the following case –

Amount	Category of Payer
An aggregate amount of interest doesn’t exceed INR 40,000 [INR 50,000 in case of a senior citizen]	Bank
An aggregate amount of interest doesn’t exceed INR 40,000 [INR 50,000 in case of a senior citizen]	Co-operative Society
An aggregate amount of interest doesn’t exceed INR 40,000 [INR 50,000 in case of a senior citizen]	Post office
An aggregate amount of interest doesn’t exceed INR 5,000	In any other case

List of interest exempted under Section 194A –

Some of the important lists of interest which is exempted under section 194A are –

Interest paid to any bank, financial corporation, Life Insurance Corporation Unit Trust of India, any company or a co-operative society engaged in the insurance business.
Interest paid by a partnership firm to the partners.
Interest paid by co-operative society to its members.

so TDS deducted is valid

P V Gopal (Job) (127 Points)
Replied 27 August 2021

Thank you Mr. Bhaskar

Interest paid to any bank, financial corporation, Life Insurance Corporation Unit Trust of India, any company or a co-operative society engaged in the insurance business.

Here our employer is automobile seller

Another side financiers

Financier released amount by extending finance to a buyer for purchase of commercial vehicle

As purchaser cancelled his buying of commercial vehicle after releasing the payment by financier, the automobile seller posed to refund the finance amount to financier with interest. The interest came more than Rs. 1.00 lac. So, deducted TDS.

So, you are confirming deduction in TDS by the automobile dealer from interest component is CORRECT.

Requesting your confirmation please.