Payment system companies have cause for cheer as the Central Board of Direct Taxes (CBDT) has helped improve cash flows for them by exempting seven types of transactions from TDS obligations.

Businesses making payments to ‘payment system companies’ (such as electronic wallet providers, merchant aggregators) in respect of the seven specified transactions will not be required to deduct tax at source, the CBDT has said.

Seven transactions
The seven transactions specified for the TDS exemption are bank guarantee commission; cash management service, depository charges for maintenance of DEMAT accounts; charges for warehousing services for commodities; underwriting service charges; clearing charges (MICR) including interchange fee and credit card or debit card commission for transaction between merchant establishment and acquirer bank.

Commenting on this development, Naveen Surya, Managing Director, Itz Cash, a payment solutions provider, said that he welcomed the CBDT move to support payment system companies.

“This is going to improve cash flows for companies like us and also enable these companies to grow faster,” Surya said.

Amit Singhania, Partner, Shardul Amarchand & Mangaldas, a law firm, said the CBDT move will reduce the compliance burden and aid in enhancing the digital economy.

Rakesh Nangia, Managing Partner, Nangia & Co, said the CBDT move should be taken positively by the companies such as Paytm, Mobikwik and PayUmoney.

“Companies would now be motivated to use these channels to make payment, thereby providing the impetus to the growth of these payment system companies.

“Encouraging the growth of payment system companies is a constructive step towards making the ‘Digital India’ dream of India’s growth story a reality,” Nangia said.