Please Help: TDS on payment to Foreing Banks
Posted Date : 31-Oct-2011 , 01:58:47 pm | Posted By Mohit Goyal
Hi everyone.
If someone has to make payment of Loan-Buyer's Credit(Principal & Interest) to a Foreign Bank e.g. CITI Bank, Singapore, wheteher there is any TDS Liablity on Interest Payment and if yes, under which section.
Secondly, will it make any difference, if the loan is taken from a foreign branch of a local bank, e.g. Punjab Nationak Bank, Singapore Branch?
Please suggest something on urgent basis???????
If someone has to make payment of Loan-Buyer's Credit(Principal & Interest) to a Foreign Bank e.g. CITI Bank, Singapore, wheteher there is any TDS Liablity on Interest Payment and if yes, under which section.
Secondly, will it make any difference, if the loan is taken from a foreign branch of a local bank, e.g. Punjab Nationak Bank, Singapore Branch?
Please suggest something on urgent basis???????
Category : Income Tax | Answers : 2 | Comments : 1 | Hits : 4393
Answers
Answer By: Ashish Karundia
Dear Mohit,
Interest paid on loan is covered u/s 194A .Section 194A(3) provides cases where the provision of TDS u/s 194A do not apply. Section 194A(iii)(a) provides that tax is not required to be deducted in case interest is paid or credited to any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank). Accordingly, you are not required to do TDS on interest payment to FOREIGN BANKS HAVING BRANCHES IN INDIA provided the conditions specified therein is satisfied.
Hope the above suffice.
Interest paid on loan is covered u/s 194A .Section 194A(3) provides cases where the provision of TDS u/s 194A do not apply. Section 194A(iii)(a) provides that tax is not required to be deducted in case interest is paid or credited to any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank). Accordingly, you are not required to do TDS on interest payment to FOREIGN BANKS HAVING BRANCHES IN INDIA provided the conditions specified therein is satisfied.
Hope the above suffice.
Answer By: Ashish Karundia
Dear Mohit,
In respect to your query regarding interest paid to foreign branch of indian bank, it may be noted that The Indian bank is resident entity under Income Tax Act. It may have foreign branches , but by the definition of residency under Income Tax Act, the Indian banks will always be resident.
Section 194A(3) is applicable for TDS on interest other than interest on securities. It clearly exempts certain categories of person from TDS on interest payment to them
(3) The provisions of sub-section (1) shall not apply
…………………….
(iii) to such income credited or paid to (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank).As indian banks are regulated under Banking Regulation Act, and all Indian banks are resident entities, section 194A is not applicable . Thus payment to them is out of purview of TDS
In respect to your query regarding interest paid to foreign branch of indian bank, it may be noted that The Indian bank is resident entity under Income Tax Act. It may have foreign branches , but by the definition of residency under Income Tax Act, the Indian banks will always be resident.
Section 194A(3) is applicable for TDS on interest other than interest on securities. It clearly exempts certain categories of person from TDS on interest payment to them
(3) The provisions of sub-section (1) shall not apply
…………………….
(iii) to such income credited or paid to (a) any banking company to which the Banking Regulation Act, 1949 (10 of 1949), applies, or any co-operative society engaged in carrying on the business of banking (including a co-operative land mortgage bank).As indian banks are regulated under Banking Regulation Act, and all Indian banks are resident entities, section 194A is not applicable . Thus payment to them is out of purview of TDS
Comments
Mohit Goyal
21-Feb-2012 , 06:49:27 pmDear Ashish Ji, Thanx for your opinion, but my payment is to foreign branch of a foreign bank to which the banking regulation act of India does not apply. Now pls clerify my position....