Due to high rates charged by Banks many people these days prefer taking Loans from NBFC’s.
TDS u/s 194A is attracted to such interest expense against NBFC loan @ 10% if interest payable is > INR. 5,000/-.
The confusion which always mints is Whether TDS deducted on Processing Fees too..??
Definition of Interest u/s 2(28A) – “interest” means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised.
Processing fees to bank is paid after sanction letter is issued but before the disbursement of loan amount. Loan is subject to payment of processing fees. Processing fess is paid to borrow the money and not as compensation after borrowing the money.
Hence Processing Fees is not subject to TDS.!!
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