02 February 2024
I run a digital marketing agency, and it is registered under LLP. I work with one freelancer and make her monthly payments. I have not deducted any TDS while making her payment so far. Should I start deducting TDS? And for past transactions, is it possible to file TDS? Please note that I have not held any TDS from past payments, and the transaction value exceeds INR 25K . Thanks.
09 July 2024
As an LLP (Limited Liability Partnership) running a digital marketing agency and making payments to freelancers, here’s how TDS (Tax Deducted at Source) should be approached:
### Should You Start Deducting TDS Now?
1. **Applicability of TDS:** According to Indian Income Tax laws, TDS should be deducted when making payments to freelancers if the total payment in a financial year exceeds Rs. 30,000. This includes payments made to individuals for professional or technical services.
2. **Freelancer Payments:** Since you have been making payments to the freelancer and the transaction value exceeds Rs. 30,000 per annum, you should start deducting TDS from future payments.
3. **TDS Rate:** The TDS rate for payments to freelancers for professional services is typically 10% under section 194J of the Income Tax Act. Ensure you deduct TDS at this rate from the freelancer's payments going forward.
### Past Transactions and TDS Filing:
1. **Past Transactions:** For payments made in the past where TDS was not deducted, you cannot retrospectively deduct TDS now and adjust it. TDS should have been deducted at the time of payment.
2. **Filing TDS Returns:** Since TDS was not deducted for past payments, you do not need to file TDS returns for those transactions. TDS filing is required only when TDS has been deducted.
### Steps to Take:
1. **Start Deducting TDS:** From now onwards, deduct TDS at the rate of 10% when making payments to the freelancer if the payment exceeds Rs. 30,000 in a financial year.
2. **Issue TDS Certificates:** Provide Form 16A to the freelancer for TDS deducted. This is a certificate of TDS deducted and deposited.
3. **Compliance Check:** Regularly review your payments to freelancers and ensure compliance with TDS provisions to avoid penalties and interest for non-compliance.
4. **Consult with a Tax Advisor:** If you have specific questions or need further clarification regarding TDS compliance, especially in the context of your digital marketing agency and payments to freelancers, consulting with a tax advisor is advisable.
By following these steps, you can ensure compliance with TDS provisions while managing payments to freelancers as an LLP in your digital marketing agency.
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