Deductibility u/s 194 A

[Anup Kumar Grover]

Whether TDS u/s 194A is required to be deducted on payment to interest on taking finance from the Indiabulls, Reliance Capital, GE Money, Chholamandlum, whether these are financial institutions or other wise financing cos

[DEV KUMAR KOTHARI]

yes, TDS is required because these are simply a companies engaged in business of financing they are not banking companies or bansk but NBFC. The exceptions from TDS are provided in S. 194A(3).Depending on the capacity of payer or the amount of interest paid by a person, there can be some exceptions. Company engaged in insurance business, receiving interest , is also exempt- it can be checked if any such company qualify for such exception u/s 194A (3) (iii)(e). The chances are remote, becasue insutrance business is usually carried in separate compnay due to applicable regulations.

The view of Sri Kothari is correct and as these companies are not banking/insurance companies, the interest component for the finance obtained would squarely liable for TDS u/s 194A.

AI Summary

TDS on interest: payments to non-bank financing companies generally require withholding, with narrow statutory exceptions.
Interest paid to entities operating as lending companies (NBFCs or similar financiers) will generally attract withholding obligations; the recipient's classification as a non-banking financial company rather than a bank or regulated insurer is determinative. Statutory exceptions may apply in limited circumstances-for example, where an entity qualifies under an insurance-related exemption-but such qualification is rare and depends on the recipient meeting the specific exemption criteria.