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of <h1>Tax Treatment of Commercial Papers and Certificates of Deposits Clarified: No TDS on Discount, Not Interest, per Section 194A.</h1> The circular clarifies the tax treatment of Commercial Papers (CPs) and Certificates of Deposits (CDs) under section 194A of the Income-tax Act, 1961. These instruments, regulated by the Reserve Bank of India, are issued at a discount to their face value and traded in the secondary market. The circular addresses whether the difference between the issue price and face value should be considered 'interest,' subject to tax deduction at source, or 'discount.' It concludes that this difference is a 'discount allowed,' not 'interest paid,' and therefore, tax deduction at source provisions do not apply to these transactions.
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