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TDS on Interest

Rachit (Analyst) (913 Points)

05 April 2010

Whether TDS is liable to be deducted on Interest paid on Foreign Currency loans taken from Foreign Banks?

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2 Replies

Nicky (Chartered Accountant) (245 Points)
Replied 06 April 2010

Any and every foriegn payment attracts section 195 (except for salary)...

So the interest paid out of india in normal circumstances would be levied TDS

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Amir (Learner) (4016 Points)
Replied 06 April 2010

Dear Rachit,

Agree with Nicky Sir, Generally TDS will be attracted & factors that will determine are -

1) Income(i:e Interest ) must be taxable in India because only then the questio of TDS will arise - In this regard u have to see Sec 9 & Sec 5

Extraxt of Sec 9 - income by way of interest payable by—

(a) the Government ; or

(b) a person who is a resident, except where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person outside India or for the purposes of making or earning any income from any source outside India ; or

(c) a person who is a non-resident, where the interest is payable in respect of any debt incurred, or moneys borrowed and used, for the purposes of a business or profession carried on by such person in India ;

Extract of Sec 5 - Subject to the provisions of this Act, the total income of any previous year of a person who is a non-resident includes all income from whatever source derived which—

(a) is received or is deemed to be receivedin India in such year by or on behalf of such person ; or

(b) accrues or arises or is deemed to accrue or arise to him in India during such year.

2) U have to refer to DTAA, if any, with the relevant country...