--Is capitalization on interest payable attracts TDS U/S 194A?
Yes, capitalization on interest payable attracts TDS as per provision. This is not the fact that the borrower uses the money on purchasing fixed assets, capital assets, purchasing stock or pay debts. TDS is to be made on interest payment.
--How TDS treated when gift is given.
If the gift is in cash, tax will be deducted from cash prize.
If the gift is not in cash or in kind, the payer has to collect the liability for tax deduction from payee.