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Applicability of TDS for legal review by Banks

Parag Shah

Dear Members,

I request opinion of the members on the following issue:

There are several applicants who have applied for loan.

  1. The Bank has appointed a legal firm / Advocate to advise on the validity of documents pre- & post sanction.
  2. The Advocate raises the invoice on the Bank- A/c Applicant.
  3. The fees payable to advocate is debited tot the account of the Applicant & thereinafter the fees have been to the advocate /firm.
  4. The Bank states it is reimbursement / paid on behalf of the applicant & accordingly the TDS is not applicable, neither it routed through the profit / loss account.
  5. Kindly advise on the above at my email id [email protected]

Thanks & Regards//

Parag Shah

+91 9869788636

Banks Must Deduct TDS on Legal Fees Paid, Even if Recorded as Reimbursements, Says Chartered Accountant A forum participant inquired about the applicability of Tax Deducted at Source (TDS) on legal fees paid by banks. The bank hires a legal firm to review loan documents, with the fees charged to the applicant's account. The bank claims these payments are reimbursements, thus exempt from TDS and not recorded in the profit/loss account. A respondent, a chartered accountant, advised that the bank is liable to deduct TDS on these payments to the lawyer, regardless of how the payment is recorded. (AI Summary)
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