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.!!

Author can be reached at [email protected]..!!

Author Bio

More Under Income Tax

6 Comments

  1. Arihant Jain says:

    Hey Ruchika
    If we read defination of ‘interest’ provided under sec 2(28B) of income tax act, it contain a line, “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” which simply defines TDS should be deducted on Processing Fees under sec 194A

  2. SHANKAR KUMAR VERMA says:

    OUR COMPANY HAS TAKEN A LOAN FROM NBFC BANK OF RS 7.5 CRORE.
    MY QUESTION IS WHAT IS THE TDS SECTION SHOULD WE PAID .

    I READ IN CLAUSE 228A OF ICOME TAX ACT WHICH SHOWS 194A

    PLEASE REPLY

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

October 2021
M T W T F S S
 123
45678910
11121314151617
18192021222324
25262728293031