To ease the pressure on defaulting borrowers, with pieces of forgiven loans being interpreted as ‘benefits’ that lenders are passing on to borrowers under the new provisions, the government has come out on tax deduction at source. Has gone (TDS,
Even though there is no cash transfer from the bank to the borrower, the haircut limit taken by the lenders is charged as ‘income’ for the borrower.
For example, if a bank reduces the outstanding loan from ₹100 crore to ₹40 crore because the borrower is unable to pay or arrange interest from time to time, the bank will have to pay 10 of ₹6 crore on ₹60 crore. % TDS will have to be paid. Which is written off from the entire loan amount.
“This will put an additional burden on the banks during loan restructuring. We feel that this particular TDS provision was inserted without adequate consultation and understanding of the consequences. It is a strange situation where the bank has to make sacrifices on account of exemption because with Just settle for TDS. We have decided to take up the matter with the government,” a senior banker told ET.
A banker pointed out this tax implications in a recent meeting, following which the industry body, the Indian Banks Association, decided at its managing committee meeting to send a representation to the government.
Multiple transactions are being included in the TDS provisions as it is the easiest way to widen the tax net as the payer is made liable to deduct as well as suffer the consequences of non-deduction.
According to senior chartered accountant Dileep Lakhani“The scope of TDS has widened. Prima facie, the provisions of section 194R (dealing with TDS) may not be applicable to the banking industry when the loan is settled with the borrower and a certain amount is written off Procedure. However, the fear among bankers probably derives from the word ‘profit’ in the new circular on TDS.”
“The courts have held that waiver of liability is not chargeable to tax if a borrower has borrowed money for acquisition of plant or machinery or land or building specifically for a project. where profit is taxed as income. Further, if a bank deducts tax, the issue of lending to the borrower would also be debatable if the said amount is not taxable,” Lakhani said. Told.
Lakhani and other tax experts are of the view that Central Board of Direct Taxesapex body under ministry of financeThe fog on TDS arising out of loan waivers and waivers should be cleared – especially as the economic stress may require a significant amount of debt restructuring and settlement by banks.
Ashish said that the government should consider investing more resources and manpower for faster disposal of low or zero withholding tax certificate requests. Mehta, partner at the law firm Khaitan & Co. “Since in case of debt settlement, banks will pay TDS from the borrowers money, the latter should approach the tax department to make the request. This will reduce the burden in cases where the parties are facing genuine difficulties. And if there is insufficient funds in the accounts of the borrowers, there are additional complications for the banks, and the banks are required to ask for the funds from the borrower,” Mehta said.