TaxTMI 
TaxTMI 
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.
TDS on processing fees paid to bank
21 Mar 2012 
12 Replies 
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Processing fee as interest: TDS exemption applies for banks but may be deductible when paid to non bank lenders under tax provisions.
Characterisation of loan processing fees determines TDS: the statutory definition of interest includes service charges related to borrowed moneys, so if processing fees are treated as interest they fall under the interest withholding regime; payments to banking companies are subject to the exemption framework under section 194A, whereas payments to non bank entities may require deduction (or be considered under alternative sections such as section 194J) depending on the nature of the charge and threshold conditions. (AI Summary)
Characterisation of loan processing fees determines TDS: the statutory definition of interest includes service charges related to borrowed moneys, so if processing fees are treated as interest they fall under the interest withholding regime; payments to banking companies are subject to the exemption framework under section 194A, whereas payments to non bank entities may require deduction (or be considered under alternative sections such as section 194J) depending on the nature of the charge and threshold conditions. (AI Summary)