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
Note:-
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.
View answer
It is a transaction in money and hence not a service
(b) Bank received 50,000 as loan processing fee from Mr. A.
View answer
it is not covered in Negative list and hence taxable
c) Bank received ` 6 lac as interest on loan from Mr. A.\
View answer
Interest received is a specified financial service covered in Negative list and hence not taxable