All About Interest under Income Tax Act and GST

The term 'interest' occurs at many places in the Income Tax Act. Interest as a matter of fact means the amount payable in any manner in respect of any money borrowed or debt incurred and includes any service fee or other charge in respect of money borrowed or debt incurred or in respect of any credit facility which has not been utilised.

Interest may be income as well as an expenditure for an assessee. It is income when a person earns it by making investments and deposits and it is an expenditure when a person takes a loan and pays interest on it. As an income, the interest is chargeable to tax whereas an expenditure it is allowable as deduction. The chargeability as well as allowance of deduction depends on the provisions of the Income Tax Act. Interest income may be chargeable as income from other sources or as income from business or profession. Sometimes interest receipt is of capital nature, hence not chargeable to tax at all. There are various judicial decisions which determine as to when a certain receipt is capital or when it is of revenue nature or when it would be chargeable as business income or when as income from other sources. As far as deductibility of interest as an expenditure is concerned, it may be allowed subject to the fulfilment of conditions provided under sections 36(1)(iii) and 37(1), as the case may be.Apart from income and expenditure there are several other aspects relevant to interest and fee under the Income Tax Act. Some of them are : various interests, like interest under sections 234A, 234B, 234C, 234D, 201(1A), 220(2), etc., disallowance of interest under sections 40(a), 40A(2) and 43B; TDS on interest; treatment of interest in case of partnership firms, co-operative societies, NRIs, etc., Fee under section 234E and 234F.

The icing on the cake is that the present book also incorporates discussion on GST aspects vis-a-vis interest. Under the GST law, interest received on account of delayed payment of supply is included in value of supply. However, interest received on loans and advances is exempt from levy of GST. Besides, a taxpayer is required to pay interest under various provisions. On the other hand, interest is payble to a taxpayer for delayed payment of refund or other amounts due to him. All the above aspects are discussed in the separate chapters.The present book thus, covers all the aspects relevant to interest under the Income Tax Act and GST. For this purpose the book is divided in 7 parts. These parts deal with the subject matter of interest in the following manner.

Part I : Interest as Income

Section A : Chargeability and Accrual of Interest Income

Section B : Interest as Income Chargeable to Tax

Part II : Interest as ExpenditureSection A : Deduction of Interest on Capital Borrowed
Section C : Disallowance of Interest

Section D : Treatment of Interest in Case of Partnership Firm

Part III : Levy of Interest and Fee for Various Defaults

Section A : Interest for Default in Complying with TDS and TCS Provision

Section B : Penal Interest Under Section 234A, 234B and 234C

Section C : Levy of Fee Under Section 234E and 234F

Section D : Interest for Other Defaults

Part IV : Interest Payable to Assessee

Part V : TDS Vis-a-Vis Interest

Section A : TDS Under Section 193 and 194A

Section B : TDS Vis-a-Vis Interest to Non-Residents

Part VI : Miscellaneous Issues and Ready Referener

Section A : Issues Relevant to InterestSection B : Ready Referencer

Part VII : Interest and GST

Section A : Overview of GST
Section B : Interst under GST

This is, therefore, a unique book covering almost all ingredients of the subject of interest under the Income Tax Act as well as under GST. We believe that it would be useful for the tax payers, the tax administrators and the tax practitioners.If there is any amendment via Finance (No. 2) Act, 2019 having impact on the subject matter of the book, the same will be provided on our website.