By IANS,
New Delhi : Non-banking finance companies (NBFCs) engaged in infrastructure financing should be exempted from tax deduction at source (TDS) on interest payment to asset financing NBFCs, an industry lobby has contended.
“This will give NBFCs sufficient cash flows to support their working capital cycle,” the Associated Chambers of Commerce and Industry of India (Assocham) has told the finance ministry.
“Such entitlement should be extended only to NBFCs engaged in infrastructure financing and registered with Reserve Bank of India (RBI),” Assocham said in a statement Monday.
As per the Income-Tax Act, banks, entities that have borrowed from banks, co-operative societies engaged in banking business, public financial institutions and insurance companies 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”.