Changes in ITR Forms and NBFC's

To give effect to a major change in Budget 2019 with regards to interest on NBFC following changes have been made in the ITRs

In the “Other information” Schedule of ITR 3 and ITR 6 Serial Number 11 (da) has been added to make a novel sum deductible on actual payment basis.

This amount is the interest payable by the assessee on any loan from a deposit taking non-banking financial company or systemically important non-deposit taking non-banking financial company.

Where

“Deposit taking non-banking financial company" means a non-banking financial company which is accepting or holding public deposits” &

“Systemically important non-deposit taking non-banking financial company" means a non-banking financial company which is not accepting or holding public deposits and having total assets of not less than five hundred crore rupees as per the last audited balance sheet”

According to a list published by RBI, there are about 69 Deposit taking NBFC and about 278 systematically important NBFC as on 29th Feb 2020. This list can be download from RBI website.

This is done consequent to making the interest income on bad or doubtful debts by these NBFC’s chargeable to tax in the year in which interest is actually received. Previously NBFC’s had to pay tax on interest on bad or doubtful loans also but to revive the NBFC’s this is one of the several steps taken by the government other than encouraging public sector banks to take risk in lending to NBFC’s through partial guarantees, removing requirement of DRR (Debenture Redemption Reserve) for public issues of debt, allowing deduction for interest U/s 80EEB for loans taken even from NBFC’s and many more.