New Delhi: Industry body Assocham has asked
the Centre to exempt infrastructure non-banking financial
companies from tax deducted at source on interest paid to
them.
In a representation sent to the government, the chamber
said this would give NBFCs sufficient cash flows to support
their working capital cycle.
Such entitlement should be extended only to NBFCs
engaged in infrastructure financing registered with the
Reserve Bank of India, following all prudential banking
norms, Assocham said.
It said, the Central Board of Direct Taxes can stipulate
that only systemically important infrastructure financing
NBFCs would be entitled to such exemption.
Under the current provisions, tax has to be deducted at
source at 10 per cent out of the interest payment made by any
borrower to NBFC.
However, banks, co-operative societies engaged in banking
business, public financial institutions, LIC, UTI, insurance
companies and some other notified institutions are exempted
from this levy, Assocham said.
As such NBFCs are in a disadvantageous position and face
severe cash flow constraints, since they operate on a very
thin interest margin.
-PTI
First Published: Monday, December 28, 2009, 23:59