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.
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,
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.
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 .
Kudos to your patient explaining.
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).
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.
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/-).
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?
Case: There is consultant working for our company and they are not an individual, they are an organisation/Business people.
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/-
Section 194 J TDS on Fees for professional or technical services - Taxin
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.
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