Tds applicability on fixed term contract

This query is : Resolved

HITESH KHONA (Querist)
Follow

03 January 2012 Dear All,

A company has appointed a person as "Member - Finance & Accounts" on fixed term contract for specific term say from 1st Jan 11 to 31st Dec 2011.
So in this case which section will be applicable for TDS?

Requesting all to please reply to the same ASAP along with any supportings if possible

Thanks In Advance

Regards
Hitesh Khona

CA PARAS BAFNA

CA PARAS BAFNA (Expert)
Follow

03 January 2012 Section 192. He will be treated as an employee and TDS will be deducted on his salary U/s 192.

HITESH KHONA

HITESH KHONA (Querist)
Follow

04 January 2012 Thanks for reply.
Any new suggetions are welcomed for more clarity.

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
Follow

27 July 2025 Hi Hitesh,

For a person appointed as "Member - Finance & Accounts" on a fixed-term contract (from 1st Jan 2011 to 31st Dec 2011), the applicability of TDS (Tax Deducted at Source) depends on the nature of payment and the type of service.

Here’s a breakdown:

1. Is the person an Employee or a Consultant?
If this person is treated as an employee (i.e., under a contract of service), then TDS on Salary will apply under Section 192 of the Income Tax Act, 1961.
The company will deduct TDS on the salary paid as per the applicable slab rates.
The entire period (1 year) will be treated as employment period.
If this person is engaged as a contractor or consultant (i.e., under a contract for services), then the payment will be treated as Professional Fees or Contractual Remuneration.
TDS will then be deducted under Section 194J (TDS on professional fees).
The applicable rate is generally 10% on fees for professional services.
This assumes the person is not an employee and is paid as a contractor.
2. Which section applies in your case?
Since you mentioned the designation as "Member - Finance & Accounts" on a fixed term contract, if the contract resembles employment (i.e., fixed working hours, employer provides infrastructure, regular monthly payment), Section 192 applies.
If it is purely a contract for service without employer-employee relationship (more like a consultant), Section 194J will apply.
3. Additional points:
Fixed term employment contracts are considered employment for TDS purposes under Section 192.
Even if the contract is for a fixed term, if it is a service contract (like consultant), then Section 194J applies.
If the payment exceeds specified thresholds, TDS must be deducted.
4. Supporting references:
Section 192 of Income Tax Act - TDS on Salary
Income Tax Department - Section 192
Section 194J of Income Tax Act - TDS on professional fees
Income Tax Department - Section 194J
Summary:
Nature of Contract Applicable TDS Section Remarks
Fixed term employment contract Section 192 Treated as salary, TDS on salary rules
Contract for professional service Section 194J TDS on professional fees at 10%
Suggestion for clarity: Please confirm the nature of contract (employment vs consultancy) and the payment structure to finalize the applicable TDS section.

You need to be the querist or approved CAclub expert to take part in this query .
Click here to login now