Following financial services are covered in negative list

Services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount like

  • Interest on loan/credt limit/over draft
  • Interest on mortgage or loan
  • Interest on FD/Savings
  • Interest on Corporate Deposits
  • Bill discounting/Cheque discounting/invoice discounting charges
  • Subscription for trading in Commercial paper or Certificate of deposit



Following are not covered and hence taxable

  • Investments by way of equity or any other manner where the investor gets a share of profit.
  • Service charges or admisitrative charges or entry charge

Services by way of inter se sale or purchase of foreign currency

amongst banks or authorised dealers of foreign exchange

or amongst banks and such dealers.

  • Repos and reverse repos are normally used by banks to borrow or repay money to RBI.Hence these are covered in negative list
  • Sale of foreign exchange from bank to bank or dealer to bank and vice versa are covered

        However Sale of foreign exchange to general public not covered, hence taxable



Question 8
With reference to the Finance Act, 1994, discuss the taxability of following activities relating to a bank:

(a) Bank extended housing loan of ` 50 lac to Mr. A.

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(b) Bank received  50,000 as loan processing fee from Mr. A.

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c) Bank received ` 6 lac as interest on loan from Mr. A.\

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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.