What changed
The revised Master Circular consolidates all instructions on agency commission issued by RBI up to March 31, 2025, replacing the previous circular dated April 1, 2024. It clarifies that agency banks collecting stamp duty via physical or e-challan are eligible for commission, provided they do not charge the public or receive separate remuneration from the state government. It also reiterates that banks' own tax payments (TDS, corporation tax) are not eligible for agency commission and must be excluded from claims.
What it means for you
Banks must ensure their agency commission claims exclude own tax liabilities and comply with the updated eligibility rules for stamp duty collection. The circular reinforces that commission is not payable for transactions like state government borrowings from financial institutions or franking vendor activities. This impacts how banks report and claim commission for government business, requiring tighter internal controls.
What you must do
- Review and update internal processes to exclude own tax liabilities (TDS, corporation tax) from agency commission claims.
- Ensure stamp duty collection via physical or e-challan is claimed only when no charges are levied on the public or separate remuneration received from state government.
- Train staff on the revised eligibility criteria for agency commission, especially regarding franking vendor and state borrowing transactions.
- Submit the required certificate confirming exclusion of own tax liabilities with commission claims.
Who it affects
All agency banks handling government business, Branches collecting stamp duty or tax payments, Treasury and compliance teams at agency banks
Are banks eligible for agency commission on stamp duty collected via franking?
No, if the bank acts as a Franking Vendor and collects stamp duty from the public, it is not eligible for agency commission because the state government pays it separately. However, if the bank collects stamp duty from a Franking Vendor via challan for credit to the Treasury, it is eligible.
Can banks claim agency commission on their own tax payments?
No, agency banks paying their own tax liabilities (TDS, corporation tax) through their branches or other banks must exclude these from commission claims and provide a certificate to that effect.
What transactions are not eligible for agency commission under this circular?
Transactions like state government short-term/long-term borrowings from financial institutions, own tax payments by banks, and franking vendor activities are not eligible. Only revenue receipts, payments, pension, and other specifically advised items qualify.