TDS
This query is : Resolved
CA skmnair
(Querist)
13 April 2009
Company X providing card swiping machines to various murchants and getting service charges for the same, all transactions are routed through card issuing bank and a settlement bank. Company X getting service charges from various merchants in turn Company X paying commissions to card issuing bank and settlement bank for their service. I need to know whether TDS need to be deducted while making such payments to banks.
CA JAIMIN TRIVEDI
(Expert)
13 April 2009
Yes. Tds will have to be deducted on payments of commissions to both the banks.
CA skmnair
(Querist)
15 April 2009
but section 194(3)exempt TDS deduction while making payemnts to banks, is it applicable here..............
27 July 2025
Great question!
Section **194A(3)** (I think you meant 194A(3)) actually **exempts TDS on interest payments by companies to banks** in certain cases, but **not on commissions or other payments**.
Here’s the breakdown:
* **Section 194A** deals with TDS on **interest payments**.
* **Section 194H** deals with TDS on **commission or brokerage**.
* **Section 194J** covers professional fees and technical services (sometimes applicable depending on nature of service).
**In your case:**
* The payments made by Company X to the **card issuing bank and settlement bank are commissions**, not interest.
* Therefore, **TDS under Section 194H (on commission) is applicable**.
* Section 194A(3) exemption applies **only to interest payments**, so it does **NOT** exempt commission payments to banks.
**Conclusion:**
Company X **must deduct TDS under Section 194H** on commission payments to the banks.
If you want, I can help with the exact rate and procedure. Would you like that?
Section **194A(3)** (I think you meant 194A(3)) actually **exempts TDS on interest payments by companies to banks** in certain cases, but **not on commissions or other payments**.
Here’s the breakdown:
* **Section 194A** deals with TDS on **interest payments**.
* **Section 194H** deals with TDS on **commission or brokerage**.
* **Section 194J** covers professional fees and technical services (sometimes applicable depending on nature of service).
**In your case:**
* The payments made by Company X to the **card issuing bank and settlement bank are commissions**, not interest.
* Therefore, **TDS under Section 194H (on commission) is applicable**.
* Section 194A(3) exemption applies **only to interest payments**, so it does **NOT** exempt commission payments to banks.
**Conclusion:**
Company X **must deduct TDS under Section 194H** on commission payments to the banks.
If you want, I can help with the exact rate and procedure. Would you like that?
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