TDS on Professional fees - income tax.. CiteHR
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rajendra_vekhande Started The Discussion:

Dear All,

We have haired consultant & we pay him professional fees & traveling expenses on monthly basis.

My question is that, on which amount we will deduct TDS? Professional Fees + Traveling or Only professional Fees?

& Why?
Please clarify


Regards,
Rajendra V

TELIKEPALLI -  Member Since: Oct 2009
Dear Rajendera,

According to Income Tax norms if we are making payment to a person for his services under consultancy equivalent or above Rs. 30,000/- in single payment or in part payments in a year we have to deduct TDS @ 10 % under section 194J.

so you have to deduct TDS @ 10 % for your consultant.

as per Income Tax norms after deduction of TDS we have to pay to govt by following next month of 7th. After wards we have to furnish quarterly e-Returns to Income Tax dept. Then we have to issue 16A either quarterly or yearly basis to respective consultant.

as far as Traveling expenses concern are you reimbursing his traveling expenses ? , if you are TDS will not attract . Even if you are paying other than consutlancy charges TDS will not attract, Hence no need to deduct TDS .

If your paying traveling expenses part of consultancy charges.TDS should be deducted as per Income Tax norms as above said.

I wish you all the best.

rajendra_vekhande -  Member Since: Oct 2009
Ok., I m paying him Rs. 75000/- as a professional fees & Rs. 15000/- as Traveling expenses, so I have to deduct TDS on 75000+15000 @ 10%. Is it right.. Rajendra

Avika -  Member Since: Aug 2008
The TDS is deducted @10% from professional fees.

You should ask him to raise 2 separate bills - one for professional fees (75000) and the other for travelling expenses (15000).

In this case, you need to deduct tax on on Rs. 75000/- and not on Rs. 15000/-

However, if he is raising only one bill, you need to deduct tax on the gross amount i.e Rs. 90000/-

I hope this would help you.

Thanks & Regards,

Avika

rajendra_vekhande -  Member Since: Oct 2009
Dear ...

Thanx for your suggestion

But, I have a question, why can’t we deduct tax on Rs. 15000/-, this amount also we paying him?
Suppose he raises two bills every month, that simply indicating he is trying to save tax on this amount.

Regards,
Rajendra V.

Avika -  Member Since: Aug 2008
There is no problem if you wish to deduct tax on full amount. raising 2 bills is a way of tax planning. It is your call to deduct tax on total amount of a single bill. Thanks & Regards, Avika

rajendra_vekhande -  Member Since: Oct 2009
Dear Avika, I don’t wish to deduct tax, I m dilemma in what I have to do as per rules, As per rules what is the correct process. Please guide, Regards. Rajendra V.

Avika -  Member Since: Aug 2008
the correct process is to deduct tax on the total amount of the bill if its a single bill.

further if he is raising 2 separate bills you need to deduct tax on the amount for professional fees only.

Thanks & Regards,

Avika

nabomita1979 -  Member Since: Apr 2006
Greetings,

Well done Avika! Read your response. You explained the scenario with data in the right perspective . The bills submit by the trainer is inclusive of the taxes. Hence would offer the trainer a direct amount 15k rather than being taxed for 90K.

Hope this helps Rajendra .

Regards,
Nabomita

niljoshi -  Member Since: Jul 2009
@Avika,

Kudos to your patient explaining.

@ Rajendra,

As the IT rules states, TDS is done on Professional Fees and not on any reimbursements.

You have 2 options: a) If its a single bill, you will have to deduct the TDS on full (90000) amount b) If the contractor wants to save this amount or you want your contractor to save this amount, you can ask him to raise 2 separate bills & deduct the TDS on Professional Charges only (75000) and not on reimbursements (15000).

It goes without saying that the contractor will have his PAN and he will loose the deducted amount on Rs.15000/- if he has Tax liability (in case, he does'nt have Tax liability, he can claim full refund in his IT returns).




 
 
 
 





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