Is Payment of Interest to Foreign Branch of Indian Bank Liable to TDS?
A listed company avails of buyers' credit in foreign currency from one of the foreign branches of an Indian bank. It repays the loan together with interest in a scheduled manner.The question is whether Tax is to be deducted from the interest payable to the foreign branch of the Indian bank?C V RATNAM DHAVEJI , HyderabadThe Indian bank is resident entity under I T Act . It may have foreign branches , but by the definition of residency under I T 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), or(b) any financial corporation established by or under a Central, State or Provincial Act, or(c) the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956), or(d) the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963), or(e) any company or co-operative society carrying on the business of insurance, or(f) such other institution, association or body or class of institutions, associations or bodies] which the Central Government may, for reasons to be recorded in writing, notify in this behalf in the Official Gazette; Since , 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.