TDS on Banking Charges

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Sunil (Querist)
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12 August 2009 Effective 1/10/09 every individual has to deduct TDS on payments to contractors.
Are charges debited by banks to our account payment for contracts. Normally banks debit to us charges for following:-
1) For not maintaining minimum balance
2) Transaction charges on usage of debit card or credit card for making online purchase of say tickets used for business or purchase of petrol.
3) Courier charges on collection of documents or cheques.

For the courier charges that are hefty on foreign bills, do we have to consider it as a contract between us and the bank or between us and the various courier companies that banks use. The courier companies issues bill in name of bank and banks debit our account per export bill.

Would the banking service be regarded as a single contract at time of opening account or would each transaction be an individual contract?

Sunil

Sunil (Querist)
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12 August 2009 I was just pondering over courier charges paid to banks. Normally when Bank pays to Courier company, they would be deducting the TDS applicable for contracts. They recover the courier charges either by debiting our account or deducting it from proceeds of our bill. Do we have to again deduct TDS on these courier charges and whether we have to deposit it into PAN of Bank or Courier Company. Logically Bank is acting as our agent and is paying the courier charges on our account. Normally should this be a banking charges or courier charges in our p and l account?

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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27 July 2025 This is a nuanced question regarding **TDS on banking charges**, especially on **courier charges debited by banks**.

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### Key Points:

1. **Banking Charges (like minimum balance penalty, transaction fees):**

* These are fees charged by the bank for services provided.
* Usually, **no TDS is required to be deducted by you** on these charges because the bank is a financial institution charging for its services, not a contractor rendering contract services to you.
* These charges are part of your banking service and not payments for a contract under section 194C.

2. **Courier Charges Debited by Bank (on your behalf):**

* The bank pays the courier company and recovers the cost by debiting your account.
* Here, **the contract for courier service is between the bank and courier company**, not between you and courier company.
* Since bank is acting as an **agent** on your behalf, your payment to bank is for banking services, not for courier services directly.
* You should treat courier charges debited by bank as **banking charges in your P\&L account**, not separate courier charges.

3. **TDS on Courier Charges:**

* Since the contract for courier service is between bank and courier company, **bank is responsible for deducting TDS from the courier company’s payments (if applicable)**.
* You are **not required to deduct TDS again on the courier charges recovered by the bank**.
* Also, TDS (if any) will be deposited in the name of courier company by the bank, not in your PAN.

4. **Contractual Aspect:**

* The banking services contract with the bank is usually a continuous service contract.
* Each transaction (like courier charges) is not a separate contract between you and bank.
* For TDS purposes, the entire banking relationship is considered one contract for service charges.

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### Summary for your case:

| Charge Type | TDS Deduction by You | TDS to Whom | Nature of Expense in Books |
| ----------------------------------- | -------------------- | --------------------------------------- | ---------------------------------------------- |
| Minimum balance penalty / Bank fees | No | N/A | Banking charges |
| Transaction charges (debit/credit) | No | N/A | Banking charges |
| Courier charges debited by bank | No | N/A (bank deducts from courier company) | Banking charges (not courier expense directly) |

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**So, you should NOT deduct TDS again on courier charges recovered by bank**. The bank acts as an agent and handles TDS with courier company if applicable.

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If you want, I can help draft a clarification note or prepare an internal memo explaining this for your accounts team or auditors. Would that help?

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