CBDT circular 3 September 2003
Circular No. 6/2003
Section 194H of the Income-tax Act, 1961 - Commission or brokerage - Clarifications regarding Turnover Commission payable by RBI to Agency Banks - exemption from TDS
What this is
Circular No. 6/2003 was issued by the Central Board of Direct Taxes on 3 September 2003. Its subject is Section 194H of the Income-tax Act, 1961 - Commission or brokerage - Clarifications regarding Turnover Commission payable by RBI to Agency Banks - exemption from TDS.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
What it does
Holds that no tax need be deducted under section 194H by the Reserve Bank of India on turnover commission paid or credited by it to agency banks. Turnover commission is what the Central Government pays, through the Reserve Bank, to banks authorised to receive tax payments and issue refunds.
Why it was issued
Representations were made to the Board that section 194H should not apply to turnover commission payable by the Reserve Bank to agency banks conducting the general banking business of the Central and State Governments on its behalf.
Who it reaches
- The Reserve Bank of India as deductor
- Agency banks conducting Government business
- Banks receiving turnover commission for collecting taxes and issuing refunds
The provisions it speaks to
Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.
The instrument, as the Board published it
The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.
Section 194H of the Income-tax Act, 1961 - Commission or brokerage - Clarifications regarding Turnover Commission payable by RBI to Agency Banks - exemption from TDS
The work of receipt of tax payments and issue of refunds is conducted by the Banks authorized for such purposes by the Reserve Bank of India (RBI). As a compensation for the work so conducted, the Central Government pays to the Banks, through RBI, commission termed as "Turnover Commission".
It has been represented to the Board that the requirement of tax deduction at source under section 194H should not be applicable in respect of Turnover Commission payable by the Reserve Bank of India to the Agency Banks (Banks authorized for conducting Government business) for performing the general banking business of the Central and State Governments on behalf of RBI.
The matter was considered in the Board and it has been decided that tax would not be required to be deducted by RBI on the amount of Turnover Commission paid or credited by it.
Circular : No. 6/2003, dated 3-9-2003.
What to watch
- The relief is narrow: it covers turnover commission paid or credited by the Reserve Bank, not commission or brokerage paid by banks to anyone else.
- It does not say the receipt is exempt - only that deduction at source is not required; the commission remains the bank's income.
- Nothing in the text limits it to a particular year, but it is written against section 194H as it stood in 2003.
Where you meet it
In a TDS survey or section 201 proceeding against a bank on agency commission, and when reconciling Form 26AS credits for turnover commission.
On the same provision
Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.
- Notification No. 31 — Income-tax (Eighth Amendment) Rules, 2009 - Amendments in Forms 24Q, 26Q, 27Q, 27EQ; Substitution of Rules 30, 31, 31A, 25 March 2009
- Notification No. 344E — A notification under section 194H of the Income-tax Act, 1961 18 May 1992
- Notification No. 175E — The Central Government, having regard to the extent of inconvenience likely to be caused to the International Air Transp 3 March 1992
- Notification No. 174E — The Central Government, having regard to the extent of inconvenience likely to be caused to the commission agents and de 3 March 1992
- Notification No. 114 — The Central Government having regard to the extent of inconvenience likely to be caused to the persons specified in the 6 February 1992
- Circular No. 619 — Section 194H l Commission, Brokerage, ETC 1 4 December 1991
A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.
Source: the Income Tax Department’s own published text — its page for this instrument.
