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TDS on interest part of EMI Car Loan

Ajay Kumar Sana (CA & CS) (48 Points)

18 January 2008

Can corporates deduct TDS on interest part of Car Loan EMI?

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19 Replies

Nagaraju Pogula (Partner) (175 Points)
Replied 18 January 2008

Hi, Interest paid on loan is covered u/s 194A . Subsection 3 of section 194A provides cases where the provision of TDS u/s 194A do not apply. Clause (iii) of sub section 194(3) provides that tax is not required to be deducted in case interest is paid or credited to banking or financial institutions.The said provision u/s 194A(3)(ii) is as under : (3) The provisions of sub-section (1) shall not apply (iii) to such income credited or paid to- (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or (f) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette; Accordingly, you are not required to do TDS on interest payment to banks on auto loan.

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(Guest)

Yes, The interest is not subject to the TDS only if the payment relates to the execptions providered therein. (already provided by another person). You have not mentioned the deductee details. If it otherwise than the persons mentioned therein, you will be required to deduct TDS.

(Guest)

TDS is required to be deducted unless lender is bank or notified financial instititution. further in case of foreign banks like Citi Bank, provisions of section 195 applies and not 194A

(Guest)

Whether Provisions of Section 194A will apply when the Interest is paid to any State Government (Govt of Bihar/Bihar State Electricity Board).

(Guest)

hi, i want to know if suppose i am taking loan for my machineary or for some other investment from bank or some other financial institu. so on that loan int. i have to deducted tds or not if i am a pvt ltd company or properitor concern firm

pls reply me

shridhar

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(Guest)

Ours is a partnership firm, we borrowed funds from ABN Amro Bank, Barcklays Bank , Reliance Capital and GE Money. Paid by EMIs.

During assessment the officer asked us " why we have not deducted TDS of these EMI Interest part as these are in above Rs.10,000/-.

We explained about Sec.194A(3)(iii).

But they are asking to produce particular notification from RBI regarding each particular institutions.

What is the solution

regards

Originally posted by :Nagaraju Pogula
"	Hi, Interest paid on loan is covered u/s 194A . Subsection 3 of section 194A provides cases where the provision of TDS u/s 194A do not apply. Clause (iii) of sub section 194(3) provides that tax is not required to be deducted in case interest is paid or credited to banking or financial institutions.The said provision u/s 194A(3)(ii) is as under : (3) The provisions of sub-section (1) shall not apply (iii) to such income credited or paid to- (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank), or (b) any financial corporation established by or under a Central, State or Provincial Act, or (c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or (d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or (e) any company or co-operative society carrying on the business of insurance, or (f) such other institution, association or body or class of institutions, associations or bodies which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette; Accordingly, you are not required to do TDS on interest payment to banks on auto loan.	"

(Guest)

hi the said loans are from standard chartered, kotak bank, icici, maruti countrywide etc

will interest on that would attract to tds

Ramakrishna (Financial Executive) (438 Points)
Replied 16 September 2008

Dear friend,

TDS is attracted on payment of interest to maruti countrywide finance which is not exempted under SEction 194A(3).

The other three banks are governed by banking regulation act and so covered under S.194A(3)(iii)(a). Therefore, TDS need not be made.

Good Bye!! Cheers!!

1 Like

(Guest)

I want to know whether we have to deduct tds on interest paid to private financial institution like Sundaram finance, Kotak Mahindra.

Please reply as soon as you get this message.

vijay

Ramakrishna (Financial Executive) (438 Points)
Replied 20 September 2008

Dear Vijay!

TDS must be necessarily made for the payment of interest paid on hire purchase loans availed from the aforementioned entities since they are not excluded under Section 194A(3).

Good Bye!!

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Punit (Service) (0 Points)
Replied 11 October 2008

1) When Loan Processing fees is paid to Bank . Is TDS applicable on such processing fees?

CA Adithya Murali (Senior Associate Analyst) (119 Points)
Replied 10 November 2008

Interest on Hire purchase loans taken by a company from Kotak Mahindra Prime Limited. WIll TDS u/s.194A apply as the lending entity is a company? I m not able to get more info on the bank. And will TDS apply on loans taken from NBFCs?

I would appreciate a reply to my e-mail id - adi_murali @ yahoo.co.in