14 July 2024
Yes, you are required to deduct TDS (Tax Deducted at Source) on the payment made to a lawyer or a law firm for legal expenses. Here’s how it applies based on the breakup you provided:
### TDS on Legal Expenses:
1. **Nature of Payment:** - The payment to the lawyer or law firm is categorized as a professional fee or payment for professional or technical services under the Income Tax Act.
2. **TDS Applicability:** - As per Section 194J of the Income Tax Act, TDS is applicable on payments made for professional or technical services. Legal services fall under the category of professional services. - TDS is required to be deducted on the total payment made for legal services, which includes both the professional fee (₹1,00,000) and any reimbursable expenses directly related to the services provided (₹10,000).
3. **Rate of TDS:** - The current rate of TDS under Section 194J for professional or technical services is 10% (excluding GST, if applicable). - Therefore, you would need to deduct TDS at 10% on the total invoice amount of ₹1,10,000.
5. **Calculation of TDS:** - TDS Amount = Total Payment * TDS Rate - TDS Amount = ₹11,000
### Conclusion:
- **TDS Deduction:** Yes, you should deduct TDS at 10% on the total invoice amount of ₹1,10,000 when making payment to the lawyer or law firm. - **Payment:** Deduct the TDS and remit it to the government within the prescribed timelines. Ensure compliance with TDS filing requirements (Form 26Q) and issue Form 16A to the lawyer for the TDS deducted.
Always verify the current TDS rates and consult with a tax advisor or Chartered Accountant for specific advice tailored to your situation and to ensure compliance with applicable tax laws.
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