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CS Executive · Tax Laws and Practice · Computation of Total Income and Tax Liability of various Entities

Under section 37 of the Income-tax Act, 2025, which of the following is a 'specified financial entity' for the purpose of interest on borrowings allowed on actual payment?

A scheduled bank is a specified financial entity under section 37(7). Primary agricultural credit societies are expressly excluded, and moneylenders or foreign trading companies are not listed, so interest owed to a scheduled bank is allowed on actual payment.

  1. AA primary agricultural credit society
  2. BA scheduled bankCorrect
  3. CA private moneylender registered locally
  4. DA foreign trading company

Explanation

Section 37(7) lists public financial institutions, State Financial Corporations, State Industrial Investment Corporations, notified NBFC classes, scheduled banks and co-operative banks. It excludes primary agricultural credit societies and primary co-operative agricultural and rural development banks. Only a scheduled bank qualifies.

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