09 February 2023
If the payment is for providing any CSR services to the company itself or to beneficiaries NAMED by the company, then TDS will be attracted.
(For example, if you ask an NGO to train your staff on CSR related issues, then this would attract TDS under sec. 194J). This could also happen if the company nominates the CSR beneficiary participants.
However, if the NGO has no discretion in identifying the participants or CSR beneficiaries and if the NGO is a mere implementation partner, TDS will normally be attracted.
Please let me know your views with relevant case laws or income tax or CSR provisions, if any
11 July 2024
The application of TDS (Tax Deducted at Source) under Section 194J of the Income Tax Act, 1961 in the context of CSR (Corporate Social Responsibility) activities involves certain considerations and interpretations. Here are the key points to understand:
1. **Nature of Payment**: Section 194J pertains to payments made for professional or technical services. If a company engages an NGO or any other entity to provide CSR-related training or services to its employees or beneficiaries, the applicability of TDS under this section depends on the nature of the services provided.
2. **Discretion in Identifying Participants**: As per the Income Tax provisions, if the NGO has discretion in identifying the participants or beneficiaries of the CSR activities, TDS under Section 194J may be attracted. This is because such activities would typically qualify as professional or technical services.
3. **Implementation Partner vs. Discretion in Beneficiary Selection**: If the NGO or entity is acting merely as an implementation partner and does not have discretion in identifying the participants or beneficiaries of the CSR activities, TDS may not be applicable under Section 194J. In such cases, the payment may be considered as a reimbursement for actual expenses incurred rather than a payment for professional or technical services.
4. **Case Laws or Relevant Provisions**: While there may not be specific case laws directly addressing CSR activities and TDS under Section 194J, the interpretation typically revolves around whether the payment is for professional or technical services rendered by the NGO. The discretion in selecting beneficiaries or participants is a critical factor in determining the applicability of TDS.
5. **Compliance and Documentation**: It is advisable for companies to carefully review the nature of services provided by the NGO, the terms of the engagement, and consult with tax experts to ensure compliance with TDS provisions. Proper documentation of the agreement, nature of services, and justification for non-applicability of TDS (if applicable) should be maintained.
**Conclusion**: - The applicability of TDS under Section 194J for CSR activities hinges on whether the services provided by the NGO involve professional or technical expertise and whether the NGO has discretion in identifying beneficiaries or participants. - Companies should assess each CSR engagement individually to determine the exact nature of services and the applicability of TDS. - While there may not be specific case laws cited here, the interpretation is based on the provisions of the Income Tax Act and relevant guidelines from the Income Tax Department.
For specific cases or detailed advice, consulting with a qualified tax professional or chartered accountant would provide tailored guidance based on the specifics of each CSR engagement.
CAclubindia
