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Tds on gift

anuj (auditor) (154 Points)

25 November 2011

we are offering a car as gift for completing a sale target given to agent/networker.this person receives commission from us for sale on which we deduct tds and we gave him target to complete the targeted sale and offering a car. we will pay ex-showroom price of car directly to car agency and local taxes and other expenses will be borne by agent himself.

please advice me regarding tds applicability or any other tax implication on this transaction. and whether this to be treated as gift or as commission

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8 Replies

Sultan Mohiuddin (Practicing Chartered Accountant) (56 Points)
Replied 25 November 2011

since a car is a capital asset,there is no liability on you to deduct tds,

however the receiver will be subjected to payment of gift tax.

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R K DUMREWALA (FCA) (24 Points)
Replied 25 November 2011

The Company may make Gifts to its employess & concerned persons. It is a GIft, No TDS to be deducted by the Company AND no Income Tax will be paid by the Receiver [ Donee] as CAR [ Gift in kinds ] does come under the category of PROPERTY u/s 56(2) of the I T Act.

But if the CAR is considered as Commission Paid/Payable, TDS is required to be deducted u/s 194G of the I t Act and the Cost price of the Car will be added to the total Income of the receipient of Car

CA R K DUMREWALA

9934806832

1 Like

DHAVAL R ASHAR (AUDIT MANAGER) (100 Points)
Replied 25 November 2011

Car given to agent will not be regarded as comission , hence tds will not be deducted u/s 194h.

The Fair M.V. Of The Car shall be regarded as income from oyher sorces in the hand of receipent.

RUPESH CHOUDHURY (Student) (484 Points)
Replied 26 November 2011

Dear Mr Anuj,

1.Your case,I feel, squarely falls under the ambit of S 194 H,as follows:

Explanation (i) :

“commission or brokerage” includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person for services rendered (not being professional services) or for any services in the course of buying or selling of goods or in relation to any transaction relating to any asset, valuable article or thing, not being securities.

Hence make sure that

the agent pays the Tax amount as ADVANCE TAX calculated on the amount of payment YOU MADE or
Collect the proportionate tax amount (but in this case the tax amount you collect now and the payment you made to the car dealer;aggregate of them will be treated as consideration paid to the agent and the Deptt will levy tax accordingly)

2.S 194 G is not applicable here.

3.Gift of Motor car is also excluded from the ambit of S 56 (2) (vii).Hence no incidence of Taxation in this section.

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ashish agarwal (Trainee) (30 Points)
Replied 27 November 2011

hi anuj.. their is no tds liability on this occasion

And no tax libality on any side as per gift tax law sec 56 ammended finance act 2010..

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anuj (auditor) (154 Points)
Replied 27 November 2011

thanks all .........but still lot of confusion because of different view by each user

satish kumar Chauhan (accountant) (345 Points)
Replied 27 November 2011

Dear anuj

as per your query, it is clear that you rae paying an extra incentive to agent on compiltation of target by way of car free of cost as a gift. Expenses icurred on a/c of purchase cars is sales promotional exps and to be Dr to Sales promotional Exps than there in no need to dedudct the TDS U/S 194H.

and not taxable in hand of agent