I want to know whether commission paid for obtaining Bank Guarantee, Letter of Credit etc. to bank is exempt from TDS. If yes please provide the relevant law/section. Further whether processing fees paid to banks for obtaining loans should suffer TDS?
11 Replies
Dinesh
(CA Practice )
(19 Points)
Replied 27 December 2008
Please confirm whether TDS will be applicable on payments made to bank for credit card commission, loan processing fee etc.
Ritesh
(CA Final)
(326 Points)
Replied 27 December 2008
Mr. Rohit,
I am not so sure but do refer Sec. 194H of Income Tax Act. It might resolve your query.
Thanks
Rohit
(Service)
(38 Points)
Replied 28 December 2008
Mr. Dinesh,
The credit card issuers reimburse the amount to commercial holdings after witholding a part of the amount called as commission. It is the duty of the receipient i.e. commercail holdings to make TDS u/s 194H.
Rohit
Tushar Jain
(Service)
(23 Points)
Replied 17 January 2009
| Originally posted by :Rohit | ||
| " | I want to know whether commission paid for obtaining Bank Guarantee, Letter of Credit etc. to bank is exempt from TDS. If yes please provide the relevant law/section. Further whether processing fees paid to banks for obtaining loans should suffer TDS? | " |
Ritesh Sharma
(CA)
(58 Points)
Replied 17 January 2009
A straight forward reading of Section 194H indicates that Guarantee Commission paid to a Bank will be covered by it. There is no exemtpion to banks similar to the one provided in secton 194A. Hence TDS needs to be deducted @ 10% if the gross amount of commission is more than 2500 for the financial year.
CA Sachin vishnu tardekar
(JOB)
(95 Points)
Replied 30 January 2009
| Originally posted by :Rohit | ||
| " | I want to know whether commission paid for obtaining Bank Guarantee, Letter of Credit etc. to bank is exempt from TDS. If yes please provide the relevant law/section. Further whether processing fees paid to banks for obtaining loans should suffer TDS? | " |
CA Sachin vishnu tardekar
(JOB)
(95 Points)
Replied 30 January 2009
| Originally posted by :Rohit | ||
| " | I want to know whether commission paid for obtaining Bank Guarantee, Letter of Credit etc. to bank is exempt from TDS. If yes please provide the relevant law/section. Further whether processing fees paid to banks for obtaining loans should suffer TDS? | " |
Pramod
(Management Trainee)
(35 Points)
Replied 06 February 2009
| Originally posted by :Rohit | ||
| " | Mr. Dinesh, The credit card issuers reimburse the amount to commercial holdings after witholding a part of the amount called as commission. It is the duty of the receipient i.e. commercail holdings to make TDS u/s 194H. Rohit |
" |
Yes TDS is to be deducted, Yet there is no special exemption to the banks . but in section 194a banks are specially excluded. so still there is no circular but for the purpose of avoiding litigation we shoul deduct tds @ 10%.
Ankit Goyal
(Banker)
(78 Points)
Replied 16 February 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.
Kantilal
(Proprietor)
(22 Points)
Replied 22 March 2012
In my view no tds is attracted as the charges levied by bank for credit card payment is not in the nature of commission but it is discounting charges in the nature of interest though one may call it commission but it is not at all commission.Actually for payment of commission there should be relationship of agent & principal whereas bank is not at all acting as agent but providing a bill discounting facility.
The commission charged is basically having component of interest & collection charges and not at all haVING component of commission.Bank is providing early finance to the dealer for making sales against credit card.CA K.B.JAIN
Sunil
(Trader)
(2611 Points)
Replied 25 September 2012
The definition of interest in section 2 definition 28A of income tax act is as follows:-
"interest" means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised ;]
This definition suggests that the fees are of the nomenclature of INTEREST and therefore any TDS will be provisions of 194A and not 194H.
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