Results 1 to 1 of 1
01-05-2010, 12:52 AM #1
Government Should Exempt NBFCs From TDS On Interest Payment
An industry lobby has mentioned that non-banking finance companies (NBFCs) that are involved in infrastructure financing should be exempted from tax deduction at source (TDS) on interest payment to asset financing NBFCs.
In a statement to the finance ministry, the Associated Chambers of Commerce and Industry of India (Assocham) said, "This will give NBFCs sufficient cash flows to support their working capital cycle.” "Such entitlement should be extended only to NBFCs engaged in infrastructure financing and registered with Reserve Bank of India (RBI)."
According to the Income-Tax Act, banks, entities that have borrowed from banks, public financial institutions, insurance companies and co-operative societies engaged in banking business are not required to deduct TDS out of the interest payment.
This stipulation, according to Assocham, "puts NBFCs in a disadvantageous position and creates severe cash flow constraints as these companies operate on a thin spread of interest income".