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Tds on interest

17 August 2020

dear professionals
please tell that we deposit tds on car interest loan
loan taken from Kotak Mahindra prime I think it is nbfc so TDS is required to be deducted under section 194A
Am i correct ?
please correct me if I am wrong.
thanks in advance

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7 Replies

sabyasachi mukherjee (27099 Points)
Replied 17 August 2020

1. kotak mahindra is not a nbfc
2.Int on loan is a deductible expense..if the assesse runs a business.

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jasmeet singh (220 Points)
Replied 17 August 2020

Sir Kotak Mahindra prime , not Kotak Mahindra Bank

CA Raj Doshi (Practising CA) (8898 Points)
Replied 18 August 2020

Yes you are correct.

Sagar Patel (Tax and Business Consultant) (11611 Points)
Replied 18 August 2020

Yes, TDS is applicable on interest payable to NBFC. As per Section 194A, the exemption from TDS is only in case of interest payable to banks.

But the problem faced by deducters is how to deduct TDS on interest payment to NBFC as interest is including in installments and there is no way that payment can be done after deducting as, in most of the cases, companies pay EMI through auto debit or standing instructions or even ECS and it would not be possible to deduct TDS on every month's interest portion of EMI.

I think, Solution is to gross up the interest amount and pay TDS. After that we can ask for refund from NBFC of TDS deposited.

File TDS return after submitting the TDS, issue TDS certificate and ask for refund from NBFC as it will reflect in their 26AS.

other solutions are welcome....

1 Like

jasmeet singh (220 Points)
Replied 18 August 2020

Thank u sir

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CA Raj Doshi (Practising CA) (8898 Points)
Replied 18 August 2020

Say the interest amount is 10000. The borrower will make TDS payment of Rs.1000 and then quarterly TDS certificate to be submitted to NBFC and then the same is credited to the loan statement.