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Deduction of tds on l.c disounting charges

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Querist : Anonymous

Querist : Anonymous (Querist)

24 May 2014 Letter of Credit is opened by the buyer in favor of supplier for supply of goods which ensures the payment to the suppler at the end of the period of L.C. Since the money is not received immediately, Supplier discount the L.C with bank . The supplier pays the L.C discount charges.

Queries :
1. L.C discount charges paid by the buyer to the supplier is covered in the nature of ' Interest' or ' Reimbursement'.

2. If it is covered under ' Interest' , is it subject to TDS u/s 194A.

3. If bank discount the L.C on expiry date or before expiry period and charge interest, is it subject to TDS.

thanks you

Rupesh Jain

Rupesh Jain (Expert)

24 May 2014 LC charges is reimbursement of bank charges. not TDS required.

intt. paid to bank not subject to TDs this exemption to banking company,LIC, UTI, or co operative society doing banking business.

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