19 April 2019
Can TDS be deducted under sec 194J for service provided by an individual to a commercial concern in respect of editing or writing articles for a house journal or for content writing for a web site? It is a professional service in common sense,as it requires certain expertise and skill, but is not covered under services defined under section 44AA . It is also not a technical service under sec 44AA. Is TDS applicable to such service at all? Or is sec 194C applicable in this respect? Kindly advise.
09 January 2020
Section 194J reads as under : Every person making payment of the following notified services is required to deduct TDS under section 194J of the Income Tax Act, 1961 –
Fees for professional services; Fees for technical services; Royalty; Remuneration / fees / commission paid to director of the company (excluding salary); Fees paid for not carrying out any activity in relation to any business or profession; Fees paid for not sharing any technical know-how, copyright, trade mark, patent or any other business or commercial rights of the same nature.
Now Professional Services elsewhere are defined as The term ‘Professional Services’ means services rendered by a person carrying on –
Legal; Medical; Engineering or architectural profession or accountancy profession; Technical consultancy or interior decoration or advertising; or such other profession as notified by Board for the purpose of section 44AA.
So why services other than above can be covered u/s 194J?
14 January 2020
01. Playing safe on the part of deductor. 02. Whenever slightest of the confusion exists, the deductor prefers to apply higher of the confusion rates. Now if you are representing deductee's side, take the advance ruling from the jurisdictional ITO and hand it over to deductor. Please share your views on this.
14 January 2020
Where is the confusion in the language of section 194J. It talks of Notified Services, so only those services recognised in the Act as professional services should be the scope, and not the generally understood professional services. By convention, deductors may be playing safe, but it can not be said compliance with 194J. The tax authorities will not object because there is no loss to revenue. Problem now arises under presumptive taxation where Professional's income is considered 50% of gross earnings, and other than professionals, business income is 6 or 8% of gross. If TDS is under 194J, tax authorities tend to consider it as professional income for presumptive taxation
14 January 2020
confusion is not in the language of the section, it is the penalty for wrong deduction which is bothering the deductor. So a via media would be to get a letter from ITO by the deductor. I remember Coca Cola company used to deduct tax at the rate of 10% for advertising, in the case of one of my clients. (Please note even the gross profit in case of paper advertising is less than 5 %) Finally we got the letter from ITO to deduct tax at 2 % i.e. 194C
14 January 2020
why ITO should be reluctant? In my case, I argued with him about the income versus TDS. Once he got convinced, he issued letter to deductor to deduct tax at the rate of 2%
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