Dinesh Divekar
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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.
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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.
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,
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.
Rajendra V.
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
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.
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,
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 .
(Cite Contribution)
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).
I will also say the same what avika has answered.
Only thing I will like to add
If Service tax is charged by the professional service provider on his bill for re-imbursent then you have to deduct tds on re-imbursement bill too.
Mr. Rajendra
TDS liability arise only on INCOME, and not on expenses which reimburse, suppose i incurred 5000 towards expenses and some one reimburse me that amount in that case what i gain and what i loos? nothing why income tax liability arise on that amount.
Therefor always TDS consider on income and not on reimbursement of expenses.
Mitesh Pathak
Whether bill is split or not, TDS has to be made on out of pocket expenses like travelling.etc. If a person raises 2 seperate bills. say 50000/- towards professional fee and another bill for Rs.10000/- towards out of pocket expenses, TDS @ 10% needs to be deducted on Rs. 60000/- If PAN number is furnished. If PAN number is not furnished, TDS has to be deducted @ 20% on Rs. 60000/-. Section 194J clearly states TDS has to be deducted on any sum paid towards services covered under this section (194J).
not necessary for two separate bills it is all about who you make accounting entry, if you taken whole amount in Professional COnsulting than you have to deduct TDS on whole amount, but basically this entry wrong, becase it comprise two expenses one professional consulting and second Traveling expenses, therefore one entry you have to taken in consulting expernses and secnd entry taken in traveling expenses no matter consultant has issued one bill important thing is he has to shown both expenses separate in bill and service charge consider only on professional fess and not on whole amount.
Mitesh PAthak
Can i know what is the percentage of deduction of tax from professional fee.Will TDS Rates changes for every Finance year
can i know what is the percentage of incometax deduction from professional fee.Will there be any changes in rates for this Finance year.
TDS is applicable on the gross amount paid to consultant. Please read section 194J carefully. If the travelling expenses paid to consultant is a fixed sum every month or quarter,etc, then TDS has to be deducted on the travelling expenses paid to him also. If it is paid as actual re imbursement, then TDS deduction is not applicable.
Actual reimbursement means:
The consultant should have actually incurred the expenses. Supporting bills and vouchers have to be produced. Comapny should have paid only actual expenses incurred and claimed by the consultant.Then only there is no need to deduct TDS. Other wise TDS is very much applicable on travelling expenses paid to consultant also( i.e Rs. 75000/- plus 15000/-).
Thanks to all having this discussion.
I am willing to know that if any professional getting 90,000 per month as professional fees.
then how much total tax, he will be pay including service and other tax or how much amount he will be get in hand.
sir in April professional fees bill received 15000 /- and after december professional fees bill receive. what i do for TDS deduction.
sir in April professional fees bill received 15000 /- and after december professional fees bill receive 25000/-. what i do for TDS deduction. how i show in TDS return . 35000/- is total amount and tds deducted. but what about 15000/- april amount interest. pls reply.
I have Testing Services Bill. Basic Amount 37500, Service Tax 5250, Total Bill Amount is 42750. on Which amount we will deduct 10% TDS on Basic amount or on Total amount.
I have a question
I have hired a Business Development Consultant before I actually started my ABC LLP.
I have paid him 50000/- without deducting TDS in July. And 45,000/- in September.
Then formed a LLP for the said business in September end. I got my PAN card in December. I have just applied for TAN yesterday on 18th December.
Now,the consultant is asking for 50,000/- more.
Should I deduct TDS on (50,000+45,000+50,000) at 10% and pay him?
As per what I understand, without having TAN number, how can I deduct TDS...
And even if I deduct it, will I receive my TAN number before 6th of January to pay TDS?
I have been told that these (50,000+45,000) that I gave him from my personal account towards business development will be claimable as preincorporation expense.
Is that true, please comment on that also....
What should I do?
Please let me know if the TDS is applicable only for an individual consultant or it is applicable for business consultant as well (B2C as well as B2B).
Case: There is consultant working for our company and they are not an individual, they are an organisation/Business people.
ANSWER FOR DEVANGINDIA: If the payment to BDC is made by you individually before incorporation of ABC LLP and the same exp to be reimbursed by ABC LLP to you then NO TDS will be applicable. After incorporation of ABC LLP, whatever payment to be made to BDC will attract TDS. In your case you should deduct TDS on amt of Rs.95,000 (45000 Sep+50000 Dec) while you make payment of Rs. 50,000/- in Dec. As per Income Tax Act failure to deduct TDS will attract interest @12% P.A on TDS amount.So in your case you need to pay interest 1% p.m. on default amount of TDS Rs. 4500/-till the month of deposition of such tax. Due date of TDS Deposit: Within 7th of Next Month. In case of March TDS to be deposited by 30th April. In your case you need to File Return for Sep qtr return on wards. Penalty for failure of submitting Quarterly Return: Rs. 200/- per day of default , maximum upto the amount of TDS for the concerned period.
Time Limit of Qtrly Return submission: Apr-Jun Qtr : upto 15th Jul, Jul-Sep Qtr: upto 15th Oct, Oct-Dec Qt: upto 15th Jan, Jan-Mar Qtr: upto 15th May

ANSWER FOR PANKAJ:TDS to be charged on amount excluding Service Tax ( vide CBDT Circular No.4/2008 dated 28-04-2008). So you need to charged TDS on Rs. 37,500/-
TDS to be charged on amount excluding Service Tax ( vide CBDT Circular No.4/2008 dated 28-04-2008). So you need to charged TDS on Rs. 37,500/-
Travelling expense does not attract tds hence no need to deduct tds, However payment of professional fees attract tds subject to the marginal limit of Rs 30000. The rate of tds is 10% for all categories. Learn more about tds on professional tax here.
Section 194 J TDS on Fees for professional or technical services - Taxin
Daer Sir,
i want consultant accountant offer letter under section 194J
Dear Pradeep,
Tell the consultant to submit quotation. Get the quotation approved and then issue the Purchase Order (PO) to avail of services of the consultant. Attach appendix to PO on the terms and conditions of services like what type of services you need, when these will be needed, where these needed, how the quality of the services will be assessed, what will be the methodology of the payment etc.
Dinesh Divekar
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