TDS

This query is : Resolved

CA skmnair (Querist)
Follow

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)
Follow

13 April 2009 Yes. Tds will have to be deducted on payments of commissions to both the banks.

CA skmnair

CA skmnair (Querist)
Follow

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

Asha Kanta Sharma

Asha Kanta Sharma (Expert)
Follow

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?

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now