We have hired a consultant, and we pay him professional fees and traveling expenses on a monthly basis. My question is, on which amount should we deduct TDS? Professional fees + traveling expenses, or only professional fees? And why? Please clarify.
From India, Mumbai
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6From India, Mumbai
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Dear Rajendra,
According to Income Tax norms, if we are making a payment to a person for his services under consultancy equivalent to or above Rs. 30,000/- in a single payment or in part payments in a year, we have to deduct TDS at 10% under section 194J. So, you have to deduct TDS at 10% for your consultant.
As per Income Tax norms, after deduction of TDS, we have to pay to the government by the following month of the 7th. Afterwards, we have to furnish quarterly e-Returns to the Income Tax department. Then, we have to issue Form 16A either quarterly or on a yearly basis to the respective consultant.
As far as traveling expenses are concerned, are you reimbursing his traveling expenses? If you are, TDS will not be attracted. Even if you are paying other than consultancy charges, TDS will not be attracted. Hence, there is no need to deduct TDS.
If you are paying traveling expenses as part of consultancy charges, TDS should be deducted as per Income Tax norms as mentioned above.
I wish you all the best.
From India, Hyderabad
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According to Income Tax norms, if we are making a payment to a person for his services under consultancy equivalent to or above Rs. 30,000/- in a single payment or in part payments in a year, we have to deduct TDS at 10% under section 194J. So, you have to deduct TDS at 10% for your consultant.
As per Income Tax norms, after deduction of TDS, we have to pay to the government by the following month of the 7th. Afterwards, we have to furnish quarterly e-Returns to the Income Tax department. Then, we have to issue Form 16A either quarterly or on a yearly basis to the respective consultant.
As far as traveling expenses are concerned, are you reimbursing his traveling expenses? If you are, TDS will not be attracted. Even if you are paying other than consultancy charges, TDS will not be attracted. Hence, there is no need to deduct TDS.
If you are paying traveling expenses as part of consultancy charges, TDS should be deducted as per Income Tax norms as mentioned above.
I wish you all the best.
From India, Hyderabad
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The TDS is deducted at 10% from professional fees. You should ask him to raise 2 separate bills - one for professional fees (75000) and the other for traveling expenses (15000).
In this case, you need to deduct tax 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 information is helpful.
Thanks & Regards,
Avika
From India, New Delhi
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In this case, you need to deduct tax 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 information is helpful.
Thanks & Regards,
Avika
From India, New Delhi
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Dear ...,
Thank you for your suggestion. However, I have a question: why can't we deduct tax on Rs. 15,000/-, considering that this amount is also being paid to him? Suppose he raises two bills every month, which simply indicates that he is trying to save tax on this amount.
Regards,
Rajendra V.
From India, Mumbai
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Thank you for your suggestion. However, I have a question: why can't we deduct tax on Rs. 15,000/-, considering that this amount is also being paid to him? Suppose he raises two bills every month, which simply indicates that he is trying to save tax on this amount.
Regards,
Rajendra V.
From India, Mumbai
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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
From India, New Delhi
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From India, New Delhi
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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.
From India, Mumbai
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From India, Mumbai
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The correct process is to deduct tax on the total amount of the bill if it's a single bill. Furthermore, if he is raising two separate bills, you need to deduct tax on the amount for professional fees only.
Thanks & Regards,
Avika
From India, New Delhi
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Thanks & Regards,
Avika
From India, New Delhi
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Greetings,
Well done, Avika! I read your response. You explained the scenario with data in the right perspective. The bill submitted by the trainer is inclusive of the taxes. Hence, I would offer the trainer a direct amount of 15k rather than being taxed for 90k.
Hope this helps, Rajendra.
Regards,
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From India, Mumbai
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Well done, Avika! I read your response. You explained the scenario with data in the right perspective. The bill submitted by the trainer is inclusive of the taxes. Hence, I would offer the trainer a direct amount of 15k rather than being taxed for 90k.
Hope this helps, Rajendra.
Regards,
(Cite Contribution)
From India, Mumbai
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Hi Avika,
Kudos to you for patiently explaining.
Hi Rajendra,
As per the IT rules, TDS is applied to Professional Fees and not reimbursements. You have 2 options:
a) If it's a single bill, you will have to deduct the TDS on the full amount (90000).
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 and deduct the TDS on Professional Charges only (75000) and not on reimbursements (15000).
It is important to note that the contractor will have his PAN, and he will lose the deducted amount of Rs. 15000 if he has a Tax liability. In case he doesn't have a Tax liability, he can claim a full refund in his IT returns.
From India, Mumbai
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Kudos to you for patiently explaining.
Hi Rajendra,
As per the IT rules, TDS is applied to Professional Fees and not reimbursements. You have 2 options:
a) If it's a single bill, you will have to deduct the TDS on the full amount (90000).
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 and deduct the TDS on Professional Charges only (75000) and not on reimbursements (15000).
It is important to note that the contractor will have his PAN, and he will lose the deducted amount of Rs. 15000 if he has a Tax liability. In case he doesn't have a Tax liability, he can claim a full refund in his IT returns.
From India, Mumbai
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