Tds applicability on NBFC companies

[sunil mehta]

A partnership firm borrows takes a personal loan from HDB Financial Services Ltd,a subsidiary of HDFC Bank Ltd. for business purpose.hdb fIN.SER. LTD. IS A nbfc.That partnership firm was under tax audit in A.Y. 2008-09.The firm paid interest on personal loan exceeding rs.5000/- during the financial year. 1)Whether NBFC are subjected to TDS ?(ON INTEREST PAID BY BORROWER FOR BUSINESS PURPOSE) 2)Is there any exemption to NBFC?(Banks are out of purview of section 194A)?If yes then quote notification/circular no.

[Rama Krishana]

I thing NBFCs are not banking companies and not eligible for the provisions of section 194A. However, it seems that the matter is controversial and more debate and views are invited on this issue.

[CAGOPALJI AGRAWAL]

Since the law is clear so no need of any notification or circular. Banks are exempt only. NBFC are not exempt and I have faced similar situation.Banking companies are those on whom banking regulation act applies.

AI Summary

NBFCs must comply with TDS on interest payments for business loans; no exemption under Section 194A like banks. A partnership firm borrowed a personal loan from an NBFC, HDB Financial Services Ltd., for business purposes and paid interest exceeding Rs. 5000 during the financial year. The firm was under tax audit in A.Y. 2008-09. The query raised was whether NBFCs are subject to TDS on interest paid by borrowers for business purposes and if there are any exemptions similar to banks under section 194A. Responses indicated that NBFCs are not exempt from TDS under section 194A, unlike banks, which are covered by the Banking Regulation Act.