TDS on processing fees paid to bank

[PARAMESWARAN K L]

We are paying Proceesing fees to bank after sanction letter is issued but before disbursement. Loan is subject to payment of processing fees. whether tds will be attracted on such processing fees paid to bank.

AI Summary

Processing Fees to Banks Exempt from TDS, NBFCs Not Exempt Under Section 194A; Debate on Section 194J Continues. A discussion on a forum addressed whether tax deduction at source (TDS) applies to processing fees paid to banks. The consensus among participants was that processing fees are generally considered as part of interest under Section 2(28A) of the Income Tax Act. Therefore, payments to banks are exempt from TDS under Section 194A. However, when processing fees are paid to Non-Banking Financial Companies (NBFCs), TDS is applicable under Section 194A, as NBFCs are not exempt. Some contributors suggested that processing fees might also fall under Section 194J, but this was debated.