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Service tax on unsecured loan - individual

21 March 2015

Hi,
I want to know that if any individual who received interest on unsecured loan is liable for service tax registration.

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Kamal Kansal (Chartered Accountant) (89 Points)
Replied 21 March 2015

Hello Friend,

Para 19 of Circular No. 80/2004-Service Tax dated17-9-04 has clarified that Interest on Loan is remain excluded from the purview of service tax.

Further, Notification no. 29/2004-Service Tax dated 22-09-04 exempted the interest value on overdraft facility , cash credit facility. So as unsecured loan is also one type of overdraft/cash credit facility, interest on the same should be exempted.

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CA SHRAVANA DOTA (ACA) (125 Points)
Replied 23 March 2015

Dear Rajesh, Section 66B of the Finance Act 1994 provides that service tax shall be paid on all taxable services other than those mentioned in Negative List of services Serial No. 14 under section 66D of the Act (Negative List) mentions about services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount. Therefore interest on loan falls under the negative list and no service tax shall be payable on the same.

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