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"HUF Can Be Utilised For Receiving Loans And Paying Interest Without TDS"

Under the provisions of Section 194 A, it has been made obligatory for a person who is responsible for paying any interest (other than “interest on securities”) to the recipient, to deduct income tax at source at the rates in force. This had to be done either at the time of credit of such interest income exceeding ` 5,000 to the account of the payee, or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier. In certain circumstances, prescribed under the said Section, no deduction has to be made.
One such important condition is that where a Hindu Undivided Family pays such interest to any resident person, it need not deduct any income tax thereon in respect of the amount of the interest so paid or credited by it. This is a very useful concession available to a Hindu Undivided Family and can be utilised by taxpayers in planning their affairs and in the matter of taking loans so that they are saved from the legal requirements of deduction of tax at source from interest and also from furnishing several statements and returns in respect thereof. In case the HUF is subjected to tax audit (for turnover exceeding ` 60 Lakh) then it will be required to deduct tax at source.
Hindi Undivided Family (HUF) - Taxation and Tax Planning

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