SANJAY (CHARTERED ACCOUNTANTS) (943 Points)
11 May 2012Dear All,
If a company is paying its Car loan EMI to financing company (other then Banks), whether TDS is mandatory to be deducted on interest part of EMI paid. Or Not??
As per my view any payment made to banks for interest then TDS is not applicable. So in this case also we are not liable to deduct TDS??
Please correct me if i m wrong??
Thanks in advance..
Anupreksha Thote
(CA)
(285 Points)
Replied 12 May 2012
You are right..you are not liable to deduct tds on interest payment to financial company.
Sec 194A(3)(iii) states tht provisions of tax deduction on interest shall not apply to income credited or paid to any banking company or financial corporation......
SANJAY
(CHARTERED ACCOUNTANTS)
(943 Points)
Replied 14 May 2012
Dear Anupreksha,
I m asking about the loan provided by company other than banking company. What should i do in this case..
Example: Suppose Tata Capital or Future Capital (P) Ltd is providing car loan to a private limited company.Then is m i liable to deduct TDS.??
Please quote the section if any int his regard or any circular etc..
Thanks in advance..
SANJAY
(CHARTERED ACCOUNTANTS)
(943 Points)
Replied 14 May 2012
Dear Anupreksha,
I m asking about the loan provided by company other than banking company. What should i do in this case..
Example: Suppose Tata Capital or Future Capital (P) Ltd is providing car loan to a private limited company.Then is m i liable to deduct TDS.??
Please quote the section if any int his regard or any circular etc..
Reply soon..
Thanks in advance..
Dheeraj
(Learner)
(1100 Points)
Replied 14 May 2012
1) Your Car Laon is with financial institution, which is to be treated same as banks, hence TDS is not applicable
2) and furthur you should check first whether the interest amount exceed Rs. 5,000 (Cut Off Limit u/s 194A)
if the amount exceeds Rs. 5000 only then the liability arise to deduct TDS otherwise not.
Satya Mishra
(CA FINAL)
(105 Points)
Replied 14 May 2012
Dear Mr. Verma, if you have taken car loan from other than Banks n financial corporations than u have to Pay deduct Tax if Intrest is above the specified limit u/s 194A.
but you can not deduct from EMI's, you can do one thing ask the company to Reimburse you the TDS amount. If loan taken from tata capital, reliance capital, bajaj alianz, Indiabulls etc. than this can be done. these companies are not free from TDS deduction.
Anupreksha Thote
(CA)
(285 Points)
Replied 14 May 2012
Agreed with above replies..
If company falls under any category mentioned under sub clauses of Section 194A(3) then you are not liable to deduct tax..in all other cases you are liable to required tax..
Anupreksha Thote
(CA)
(285 Points)
Replied 14 May 2012
Agreed with above replies..
If company falls under any category mentioned under sub clauses of Section 194A(3) then you are not liable to deduct tax..in all other cases you are liable to required tax..
SHILPA MAHAJAN
(CA)
(74 Points)
Replied 25 August 2012
If car is purchased by the Proprietor in his own name and introduced the same in his business. And the business is subject to audit under sec 44AB, in that case do the provisions of sec 194A apply on him?
FANTUSH
(SENIOR ACCOUNTANT)
(21 Points)
Replied 22 September 2012
if any company have taken loan from bank as a capital loan and paid emi than tds is applicabe or not
Anupreksha Thote
(CA)
(285 Points)
Replied 27 September 2012
Tds on interest not applicable if interest is paid to Banking or Financial institutions. Loan may taken borrowed for any reason..
Vidya Nand Jha
(Proprietor & CEO)
(26 Points)
Replied 13 July 2015
A notice was served from the income tax department middleton row kolkata that a customer taken heavy vehicle commercial loan from NBFC.Customer has not falling under tds to deduct.But tds department sent a notice that why not u have deducted tds on interest paid on emi to nbfc............and cause to produce profit and loss and balance sheet since,2008.Is this true that paying EMI is liable to deduct tds from nbfc and party has to deduct tds from emi pay..............required advice
jitendra
(cc)
(42 Points)
Replied 16 December 2016
Many Small and Medium Enterprises (SME) borrow money (unsecured loans) from Non-Banking Financial Companies (NBFC). Whether interest paid on such loan attracts TDS provisions is a question frequently asked by the accountants. Here is the answer.
As per Section 194A of the Income Tax Act, 1961 a business enterprise (proprietary concern covered u/s Section 44AB, company, firm, etc) has to deduct tax (TDS) on the interest payable towards the loan from NBFCs.
Suppose, you have to pay an annual interest of Rs.1,00,000 to a NBFC (say, Cholamandalam Finance), deduct tax at 10% and deposit to the government account. If it is not done, 30% of interest i.e., Rs.30,000 will be disallowed from your expenditure u/s 40(a) (ia).
This is a common problem faced by all companies. As I have already mentioned, the interest is paid as EMI and the company will not have any option of deducting tax and paying the balance interest.
In such cases, the borrower has to pay TDS at the applicable rate (currently it is 10%) and remit it to the government. On quarterly basis, file ETDS return and issue Form 16A to NBFC.
While submitting Form 16A, make a covering letter asking them to refund TDS amount. Maybe with a little perseverance, you will get your money back.
The Income Tax department provides certain exemptions from TDS u/s 194A and some of them are –
Thanks
Jitendra Chattopadhayay - HOD Finance Accounts Department
CAclubindia
