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Tds deduction on call center services

Amit T (B.Com) (27 Points)

05 May 2014

Hello we run a call center and our clients have been deducting tax under section 194C. 2% till now. We got a call from one of our clients recently that they need to increase the same to 10%. With 10% deduction it wont be viable for us to run the show. This is the expalantion they give.

Sec 194 J which states that TDS to be deducted @ 10% on Technical Services, Professional Services, Royalty. Other professions notified by CBDT u/s 44AA(1) includes information technology services. CBDT vide Notification No. 890(E) dated 26.9.2000 [F. No. 142/49/2000-TPL] has treated the Call Centre services as information technology enabled products or services for the purposes of sections 10A(b)(i)(2), 10B(b)(i)(2), 80HHE(b). Therefore, Sec. 194J should be applicable.

Kindly tell me how should i proceed.

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5 Replies

PRITAM JAIN, CA , CS (Practising CA CS) (398 Points)
Replied 05 May 2014

Hello Amit,

As per my understanding and experience of BPO industry, you take contracts of say 100 seats at say 25000 per seat. Your job is to generate leads for your clients. This kind of arrangement is nothing but a Contract which will fall under section 194C only.

As per your client's contention that Information Technnology Services falls under 194J. Prima facie call center services is not IT service. Therefore it will fall under section 194C and not 194J

Regards

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Amit T (B.Com) (27 Points)
Replied 06 May 2014

Hello We are not into lead generation but support the product of our client by helping clients resolve their queries. I also read the whole section 194J. I could not find information technology anywhere mentioned in the section. I just found technical services given and our client says that since we are solving their products technical questions for their customers and hence it is a deduction under 194J.

Dipjyoti Majumdar (CA in service & CS. dipmaj@ rediffmail.com ) (3469 Points)
Replied 06 May 2014

Your services are liable to be taxed @ 10% and not 2% in terms of the nature of service you are providing. If you are providng a service which an ordinary man cannot and there is exercise of skill and knowledge it will attract 10% deduction.

If you are short of cash due to 10% deduction instead of 2% you may apply to Department for a no deduction or lower deduction certificate under section 197 and pay at your slab rate when you file your return.

Thanks,

Income Tax Wala: (Fin. Expert) (Chartered Accountants) (2015 Points)
Replied 06 May 2014

i agree with Dipjyoti TDS rate applicable in your case is 10% u/s 194 J.

if TDS amount is heavy then go for lower rate of TDS u/s 197

Amit T (B.Com) (27 Points)
Replied 06 May 2014

I have seen a chennai high court ruling which says “Technical service” referred in section 9(1)(vii) contemplates rendering of a “service” to the payer of the fee. Mere collection of a “fee” for use of a standard facility provides to all those willing to pay for it does not amount to the fee having been received for technical services. Here I am not offering technical service to the payer of my bills but to their customers .