TDS

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CA skmnair (Querist)
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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

CA JAIMIN TRIVEDI (Expert)
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13 April 2009 Yes. Tds will have to be deducted on payments of commissions to both the banks.

CA skmnair

CA skmnair (Querist)
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15 April 2009 but section 194(3)exempt TDS deduction while making payemnts to banks, is it applicable here..............

Aashok Kumar Sharma online

Aashok Kumar Sharma online

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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?

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