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TDS Deduction in Eductaion Business

Vivek (Director) (51 Points)

28 October 2009

Hi,

My father is running a franchise Education Business. We have a Yearly turn over around 80 lacs, out of which our share is 40 lacs.( 50% is share of the parent University whose franchise we run).

I have some queries:-

i) Out of Rs 80 lacs when our share of Rs 40 lacs is given to us, will there be a TDS deduction?If yes, how much?

ii) Secondly, is there a way to save the TDS deduction because we are not getting any profits from the business?

Thanks

Vivek

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9 Replies

CA.Tarun Maheshwari (CA, DISA) (7150 Points)
Replied 28 October 2009

Please clarify the nature of business as well as Income. If the business is of your father, then the payment of Rs. 40 lacs must be done by your father to university, not by them to you. Seondly, nature of this payment is of what kind? Either it is a fixed 50% share as commission, or it is the share of profit after deducting the expenses. What are the term and conditions of your frnchisee business woth that university. Does it hold any share in your company. There are many technical points that needs to be considered before giving any opinion on this point. Please be more clear.

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Vivek (Director) (51 Points)
Replied 28 October 2009

Hi,

We have taken a franchise of Punjab Technical University (PTU) to run its distance education courses. We have around 600 students studying at our institute. All the money is collected from the students in form of Demand Draft in the name of the University. After all the money is received by the University, University transfer our share of fixed 50% . The Univrsity doesn't hold any share in our company

Thanks

Vivek

CA.Tarun Maheshwari (CA, DISA) (7150 Points)
Replied 28 October 2009

Is this 50% paid to you in the nature of Commission. And what kind of expenses you incur for earning such income. Are the related expenses reimbursed to you by the University or these expenses are incurred at your own. If it is born by the university then it shall be treated as the commission income and it shall be liable for TDS @ 10%. And if the expenses are born by your business then you can claim expenses out of this income and reduce the profit and then can claim the TDS refund. But ultimately TDS shall be deducted when the facts and figures are looked at first sight.

Vivek (Director) (51 Points)
Replied 28 October 2009

Hi,

50% is paid as a part of Agreement by University to us. University only bears the cost of Books and some Advertisement. Rest all the expenditure of Renting the Building, Staff Salary, Electricity and Water Bills, Telephone Bills, Local Advertismenet, Petrol everything is borne by us and we manage all that in the 50% share that we recevie from the University. 50% share is a fixed money that the University has to pay to us of the total revenue generated by our institute.

Thanks

Vivek

CA.Tarun Maheshwari (CA, DISA) (7150 Points)
Replied 28 October 2009

Then in my opinion, TDS must be deducted by the University. You should treat this as business reciept. Claim all the expenditure born by you. Show your net income from this business and calculate tax thereon. Then you can claim the TDS refund if it is in excess of the actual tax liability.

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Vivek (Director) (51 Points)
Replied 28 October 2009

You are correct, TDS is deducted by the University. My father and there are 3 more partners in our business and their Designation is of Directors. Can their expenses such as Medical Bills, Petrol Bill, Electricty and Telephone Bills etc can be shown as expenditure or taken as a Reimbursement from the business claiming that all their personal expenses will be born by the business?

CA.Tarun Maheshwari (CA, DISA) (7150 Points)
Replied 28 October 2009

Although personal expenses can not be claimed out of business expenses, but there are certain ways to show these expenses, if some basic conditions are fulfilled. But I can not give these ways here in open. SO pls consult some CA for these purpose. He will guide you better in this case.