Applicability of TDS

[pran shangari]

assests purchased by a concern and financed by nonbanking finance cos the likes of Magma Finance, Tatamotors Finance or L & T Finance.The Insalment is payable monthly for a period of say 36 months.Will there be a need to deduct TDS.If Yes on what sum and under which section.

[Rama Krishana]

You need to find the correct nature of these banking institutions. Are they in the nature of banking company or NBFC. The provisions of TDS are applicable to interest paid to NBFC. See clause (iii) of sub section (3) of section 194A of the income tax act, 1961.

AI Summary

TDS applicability on interest arises where the creditor is an NBFC, creating a withholding obligation for the payer. Whether TDS must be deducted on monthly instalments depends on whether the financier is a Non-Banking Financial Company; if so, the payer has a withholding obligation on interest payable to that NBFC under the applicable provision.