TDS on payment made to bank

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CA. Jyoti Baid (Querist)
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05 January 2011 Respected all,

Should tds be deducted from payments made to banks
section 194A specifically exempts banking companies from tax deduction, but what about other sections like 194J or 194C?

Thanks & Regards
Jyoti

Ram Avtar Singh

Ram Avtar Singh (Expert)
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05 January 2011 TDS not applicable on any Govt authority and bank

CMA. CS. Sanjay Gupta

CMA. CS. Sanjay Gupta (Expert)
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05 January 2011 Very Good Question.
Sec 194A provides--
No tax is to be deducted at source If the amount is paid or credited to a banking company to which the Banking Regulation Act 1949 applies.

But this sec do not prohibit from deduction under other section.
In my view TDS can be deducted under other sec provided the bank is not controlled by Govt.
Ram Avtar Sir Please give your views on this.

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CA. Jyoti Baid

CA. Jyoti Baid (Querist)
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06 January 2011 Thank you for the reply.

Could you please refer any section, circular, notification which exempts the payments made to private banks from deduction of tds.

Ram Avtar Singh

Ram Avtar Singh (Expert)
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07 January 2011 Definition of interest U/s 2(28A) read as under :

“interest” means interest payable in any manner in respect of money borrowed or debt incurred (including a deposit, claim or other similar right and obligation) and includes
any service fee or other charge in respect of moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized.”

Loan processing charges/bank guarantee commission/ L.C. charges etc. is in respect of money borrowed, therefore it falls within the above definition. But as per Section 194A(3)(iii)(a) interest
payment to banking company is excluded from TDS.

Accordingly there is no liability for TDS on payments made towards loan processing charges/bank guarantee commission/ L.C. charges etc. to banking companies.

So TDS not applicable on bank under RBI governing. allmost all bank governed by RBI.

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Ramprasadp

Ramprasadp (Expert)
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13 February 2013 Sir,

Can you please clarify why BG charges and LC commission etc., are come U/s.2(28A), as there is no money borrowal, with case law?

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