Please suggest,
Whether TDS to required for payment of interest on loan taken from foreign banks?
CA PALLAVI VOHRA (Learner) (140 Points)
20 January 2010Please suggest,
Whether TDS to required for payment of interest on loan taken from foreign banks?
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 20 January 2010
Ms.Pallavi Vohra
Your question is not clear. Are you talking of interest paid to Indian Branches of Foreing Banks or interest paid on loan obtained from Non Resident Foreign Banks.
Best Wishes
Sathikonda
sanjay kumar
( tax consultant)
(90 Points)
Replied 20 January 2010
SO FAR I HAVE UNDERSTOOD YOUR QUESTION ...YOU WANT TO KNOW WHETHER TAX IS TO BE DEDUCTED ON INTEREST PAYMENT MADE TOWARDS LOAN INTEREST FOREIGN BANKS ....
TAX IS NOT DEDUCTIBLE ON PAYMENT OF INTEREST ON LOAN TAKEN FROM BANKS
CA PALLAVI VOHRA
(Learner)
(140 Points)
Replied 20 January 2010
My question is for interest payment to non resident foreign banks.
CA PALLAVI VOHRA
(Learner)
(140 Points)
Replied 20 January 2010
Mr. Sanjay how can we justify this..............means can we say that as a like income is not chargeable to tax in India???
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 20 January 2010
Ms.Pallavi Vohra
First of all it has to be determined whether the interest paid to non-resident foreign banks is taxable in India? To determine the matter please make a list of answers by going through the section 5, section 9 and section 195 and also DTAAs with the concerned countries. Then you will get the clarification.
Best Wishes
Sathikonda
sanjay kumar
( tax consultant)
(90 Points)
Replied 20 January 2010
INCOME IS DEFINATELY CHARGEABLE TO TAX IN INDIA ......TAXATION OF INCOME OF THE FOREIGN BANKS OR FOR THAT MATTER INDIAN BANKS IS A DIFFERENT MATTER ALTOGETHER... IT HAS DIFFERENT PROCEDURE TOOO
sanjay kumar
( tax consultant)
(90 Points)
Replied 20 January 2010
FOREIGN OR FOR THAT MATTER INDIAN BANKS TOO ARE TAXED FOR THE PROFITS ....BUT TAX IS NOT DEDUCTED ON PNTEREST PAID TO THEM FOR THE LOAN ...
sanjay kumar
( tax consultant)
(90 Points)
Replied 20 January 2010
IF YOU ARE STILL NOT SATISFIED ..WRITE BACK TO ME....
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 21 January 2010
Mr.Sanjay Kumar
Please enlighten me on the issue of "Tax is not do be deducted at source on interest paid to Non Resident Foreign Banks on the loan obtained by an Indian Company/Firm".
Anticipating an early reply from you,
Best Wishes
Sathikonda
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 21 January 2010
Ms. Pallavi Vohra
Please let me know to which Non-Resident Foreign Bank the interest has to be paid. I mean in which country the Bank is situated?
Best Wishes
Sathikonda
CA PALLAVI VOHRA
(Learner)
(140 Points)
Replied 21 January 2010
Mr Sanjay,
Thanks for immediate reply.Actually by like income i meant interest income of Banks i.e. as TDS is not deductible on interest payment to Indian Banks or to Indian Branches of foreign banks can we say interest payment to Foreign bank is also exempt from TDS.
But what is confusing me is :As Interest payment to Indian Branches of foreign banks are specifically exempted, does it implies that other branch of foreign banks are not covered here and we require TDS for that?
CA PALLAVI VOHRA
(Learner)
(140 Points)
Replied 21 January 2010
Mr. Sathikonda,
It is a Germany Based Bank.
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 21 January 2010
Ms.Pallavi Vohra
I am herewith attaching document containing agreement between Government of Republic of India and Govrnment of the Federal Republic of Germany for avoidance of double taxation.
Anumanchipalli Sathikonda
(Tax Consultant)
(1559 Points)
Replied 21 January 2010
Ms.Pallavi Vohra
Now please
(i) go through section 9 of the income-tax act to come to a concusion whether the receipient of the interest has a business connection either directly or indirectly in India.
(ii) go through Article 5 of the Agreement to come to a conclusion that the receipient of the interest is having a permanent establishment in India
(iii) go through Article 11 of the Agreement to come to a conclusion whether the impugned interest is taxable in India (the rate of tax is also fixed in this article)
(iv) go through sub-section (6) of section 195 and follow the procedure as contemplated therein
If you cannot come to a conclusion based on the facts and in the circumstances of the case pleasse approach AAR to determine the matter. You will be in the safe zone then. You will not be a defaulter.
Best Wishes
Sathikonda
GSTR 9 and 9C for FY 23-24 as amended by Notification 12/2024 dated 10th July 2024(with recording)
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