Supplier drawing hundi on buyer and routing it through his banker with instructions to charge interest on amount of hundi from date of acceptance to date of actual payment - Whether tax is deductible at source by party retiring hundi from interest at the time of making payment to bank

Supplier drawing hundi on buyer and routing it through his banker with instructions to charge interest on amount of hundi from date of acceptance to date of actual payment - Whether tax is deductible at source by party retiring hundi from interest at the time of making payment to bank https://www.taxtmi.com/circulars?id=4453 If a usance bill/hundi is immediately discounted by a bank which advances the net amount, the bank acquires the bill and its payment to the supplier is a price, not interest, so no tax is deductible at source by the bank and the buyer need not deduct tax when paying the bank under the exemption for payments to banks. If instead the bank merely receives payment as agent and credits it to the supplier, any interest component is received for the supplier and the buyer must deduct tax at source from that interest even if routed through the bank. en-us Sat, 07 Nov 1970 00:00:00 +0530 Tue, 29 Jul 2008 17:11:00 +0530 TaxTMI RSS Generator Supplier drawing hundi on buyer and routing it through his banker with instructions to charge interest on amount of hundi from date of acceptance to date of actual payment - Whether tax is deductible at source by party retiring hundi from interest at the time of making payment to bank https://www.taxtmi.com/circulars?id=4453 If a usance bill/hundi is immediately discounted by a bank which advances the net amount, the bank acquires the bill and its payment to the supplier is a price, not interest, so no tax is deductible at source by the bank and the buyer need not deduct tax when paying the bank under the exemption for payments to banks. If instead the bank merely receives payment as agent and credits it to the supplier, any interest component is received for the supplier and the buyer must deduct tax at source from that interest even if routed through the bank. Circulars Income Tax Sat, 07 Nov 1970 00:00:00 +0530 https://www.taxtmi.com/circulars?id=4453