tds on earnest money refund along with assured return

[satbir singhwahi]

the pvt ltd co. is receiving earnest money for allotment of plot. after the maturity of time period i.e 5 yrs, the amount is refunded along with assured return. whether tds u/s 194A is applicable on the difference amount, total amount received and amt refunded.

[Mukesh Kumar]

The provision of section 194A are applicable on Interest. The amount which represents interest is subject to TDS. Earnest money, if not in the nature of interest, should not be subject to TDS.

AI Summary

TDS on interest: assured return components treated as interest attract withholding, while refunded principal does not. Withholding tax on interest applies only to amounts that are in the nature of interest or return on money; any component that represents assured return is subject to TDS, whereas the refunded principal portion of earnest money that does not constitute interest is not subject to withholding under the interest-specific provisions.