SERVICE TAX ON NBFC

[NITIN GARG]

DEAR SIR

One of my client is running a NBFC, he is having income from Interest from loan/ hypothecation   transactions, does it chargeable to service tax under banking and financial services or not.

AI Summary

Interest Income Not Subject to Service Tax for NBFCs; Other Income Types May Be Liable Under Banking Services Rule. A query was raised regarding the applicability of service tax on income from interest earned by a Non-Banking Financial Company (NBFC) through loan or hypothecation transactions. Two responses clarified that interest income is not subject to service tax under banking and financial services. One response mentioned that while interest is exempt, other types of income might be liable for service tax. Both responses confirmed that earning interest is not considered equivalent to providing or receiving services, thus excluding it from service tax liability.