Tax deduction on routed interest: immediate bank discounting avoids TDS, agency collection requires TDS on interest. Tax deduction at source on interest for a hundi routed through a bank depends on the bank's role. If the bank immediately discounts the usance bill/hundi and takes ownership, the net payment to the supplier is a price for the bill and not interest, so no tax is deductible by the bank or the buyer. If the bank merely acts as agent and collects on behalf of the supplier, the collection includes interest payable to the supplier and the buyer must deduct tax at source on that interest.