TDS U/s 194A on vehical loan

[HIMANSHU JARIWALA]

Dear All

Is any TDS required on intrest payment on vehical loan taken from financial institution like 'Sundaram Finance'. I heard that earlier it was exepted but ti is withrawn in current year.

[Ram Babu]

If the assessee is an individual not falling within the purview of tax audit, there is no TDS liability.There are certain exemptions to Sec 194A for TDS deduction on interest other than interest on securities.
In case if the interest is paid to Banking Company, Public financial institutions, co-operative society engage in the business of banking. Then there is no need to deduct the TDS on interest paid. just check Sundaram Finance whether  is covered as public financial institution. 

[Sathish Kamath]

Tax Deductor is required to deduct tax at source @ 10% u/s194A from the payment of Finance charges or any other charges paid to Sundaram Finance Ltd for availing vehicle loan, if aggregate of such sum exceeds Rs.5,000 in a year. If the Company produces Nil deduction certificate from their Jurisdictional Assessing Officer (TDS) to the tax deductor then TDS need not be made by the tax deductor. If lower TDS certificate is produced then TDS shall be made at such lower rate.

AI Summary

TDS on vehicle loan interest applies unless payer obtains nil or lower certificate or lender is an exempt institution. A tax deductor must deduct TDS on finance charges or other charges paid for a vehicle loan when aggregate payments exceed the statutory threshold; production of a nil deduction certificate obviates deduction and a lower deduction certificate permits deduction at the lower rate. Payments to banking companies, public financial institutions, or cooperative societies engaged in banking are generally not subject to TDS, and payers should verify whether a particular lender qualifies for that exemption.