Usance Discounting

Tax Glossary Definition

Usance Discounting

Usance discounting refers to a facility where a bank purchases or discounts trade bills payable after a specified period before their maturity, providing immediate funds to the holder. The interest or discount earned by the bank or any related party is considered taxable income.

Example: A trade bill of ₹1 lakh is discounted by a bank, generating ₹2,000 as interest, which is taxable.

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