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Tds on interest on loans from finance companies

(Guest)

If a company, firm or Individual (to whom audit is applicable) pays loan interest (eg on car loan) to a finance company TDS should be deducted. But since all the EMI cheques (postdated) are already given to the finance company, how can the assessee deduct TDS?

The finance companies should atleast issue form 26A certificate from their CA to their customers.

Awaiting member's views on this!

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10 Replies

Ganeshbabu K (Audit and Tax Advisory) (48564 Points)
Replied 06 January 2014

1)TDS is applicable on interest paid to NBFC.

2)generally it will not get deducted at the time of EMI payment..

3)you need to pay TDS from your pocket and then after filing TDS return if you provide FORM16A for TDS paid on interest paid to NBFC they will pay you back the TDS money..this is what generally goes in case of NBFC tds settlement

4)just debit the NBFC account for the tds paid and as and when you collected money from them credit their account

Thanks & regards
Ganesh babu k

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Ganeshbabu K (Audit and Tax Advisory) (48564 Points)
Replied 06 January 2014

You deposit tds in the name of nbfc on tds interest amount and collect the tds amount from nbfc by producing tds certificate to them. Ask them and confirm whether they have any tds lower deduction certificate as per 197,,generally nbfc do apply for lower deductions.

Thanks & regards

Ganeshbabu

Refer my reply,

/forum/applicability-of-tds-on-interest-to-nbfcs-263089.asp#.UspV4tIW1Gg

(Guest)

Thank you for the reply. But the experience is that most NBSCs do not cooperate with their customers and donot refund the TDs amount.

CA YASIN MALKANI (CA ) (49 Points)
Replied 05 January 2016

they do cooperate and the even refund the money.. because they are in business and they have to take care of clients in this competitive era.

Hardik Shah (Tax Consultant) (85 Points)
Replied 20 April 2016

Sir,

I want to know that if I Purchase a car by NBFC fiance and i am under Audit , than is it required to deduct TDS on Interest paid for Car LOan from NBFC?

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CA YASIN MALKANI (CA ) (49 Points)
Replied 21 April 2016

@ Hardik Shah

Dear Member,
You have to deduct TDS on such interest payments

Manoj Raturi (student-CA FINALS) (190 Points)
Replied 21 April 2016

yes bro .. agre with ganesh babu.. if u dont deduct tds then there are high chances that department will find this and penalies u .

Hardik Shah (Tax Consultant) (85 Points)
Replied 21 April 2016

Thank you both for providing me information.

Yogesh Gaikwad (Accountant) (32 Points)
Replied 20 September 2016

Hi,

If I have loan on asset from some financial company (i.e. Srei Finance, Magma Finance, HDB Finance or DHFL), can this compnay's CA provide us CA Certificate - form 26A to exempt TDS on interest??

And if they provided it after filing of my ITR then is it valid for exemption on TDS???

Please reply

PARUL YADAV (finance expet) (93 Points)
Replied 10 July 2024

Tax Deducted at Source (TDS) on interest on loans from finance companies, including Kotak Mahindra Bank, is applicable if the interest exceeds Rs. 5,000 in a financial year. According to Section 194A of the Income Tax Act, the TDS rate is 10%. If the recipient does not furnish their PAN, the rate is 20%. For Kotak Mahindra Bank, TDS is deducted at the time of credit or payment, whichever is earlier. The deducted amount is then deposited with the government, and the bank issues a TDS certificate to the borrower, which can be used while filing income tax returns.