Scope of withholding tax provisions as per the Income tax Act, 1961, and various circulars, in respect of payments to persons residents in India Category
Definition
Illustrative list of expenditure covered (including as per CBDT Circulars)
Illustrative list of expenditure excluded (including as per CBDT Circulars)
Sala Salari ries es,, Per Perqu quis isit ites es etc etc
Paym Paymen ents ts liab liable le to FBT FBT (fo (forr det detai ails ls refe refer r FBT chart)
Salary (Section 192)
All payments made to employee including stock options and employee discounts
Interest other than interest on securities (Section 194A)
As per section 194A, any person paying interest other than interest on securities shall be liable to deduct TDS.
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Contractual payments (Section 194C)
As per section 194C, any person paying any sum to a resident for carrying out any 'work' (including supply of labour for carrying out any work) in pursuance of contract is liable to deduct tax under this section.
Payment for:
Payment to:
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tran transp spor ort, t, serv service ice cont contrac racts ts
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airlines / travel agents for tickets
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broa broadc dcas asti ting ng,, tele telecas casti ting ng,,
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lab labour our cont contra ract ctss
banks for services like discounting of bills, opening letters of credit etc.
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courier s er ervice s
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routine / normal maintenance contracts
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supply of printed material
contractor engaged in the business of plying, hiring, leasing of goods carriages and owning not more that two carriages at any time during the year.
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elec electr tric ical al cont contra ract ctss
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reimbursement of actual expenses, if forming part of the bill amount
any person for hiring / renting of equipment
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recruitment agencies.
The expression work shall also include a) advertising, b) broadcasting and telecasting c) carriage of goods and passengers by a ny mode of transport other than by railways; d) catering
interest paid to group company for loans / deposits taken
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advertisement (note 3)
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Clear Clearin ing g & For Forwa ward rdin ing g age agent ntss
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interest credited / paid to specified banking companies, financial corporation established by or under a Central, State or Provincial Act, LIC, and such other entities.
Category
Commission / brokerage (Section 194H)
Rent (Section 194I)
Definition
Illustrative list of expenditure covered (including as per CBDT Circulars)
Illustrative list of expenditure excluded (including as per CBDT Circulars)
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
Payment for:
Payment for:
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professional services, except services in the nature of advertising
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insu insura ranc ncee comm commis issi sion on
As per section 194-I, “rent” means any payment, by whatever name called, under any lease, sublease, tenancy or any other agreement or arrangement for the use of (either s eparately or together) any, land; or building (including factory building); or land appurtenant to a building (including factory building); or machinery; or plant; or equipment; or furniture; or fittings, whether or not any or all of the above are owned by the payee .
Rent paid for:
advertisement (note 3)
Commission to: -
real es estate ag agent
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land
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building
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mach machin inery ery,, plan plantt or or equi equipm pmen entt
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furn furnit itur ure, e, fitt fittin ings gs
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hotel (note 4)
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busi busine ness ss cen centr tree agre agreem emen entt
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comp compos osit itee ren rentt ( ie rent rent on premises and rent on amenities)
Payment of refundable deposit
Payment of non-refundable deposit, which can be adjusted against future rent Professional Services/ Technical Tech nical Services (Section 194J)
(A) "Professional services" means services rendered by a person in the course of carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or advertising.
Fees paid to:
Payment for:
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lawyers
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CAs / ac accounta nt nts
cons constr truc ucti tion on,, assem assembl bly y, minin mining g or like project
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engineers
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architects
rout routin inee / norm normal al maint mainten enan ance ce contracts
(B)"Fees for technical services" means any consideration for the rendering any managerial, technical or consultancy services (including the provision of services of technical or other personnel) but does not include consideration for any construction, assembly, mining or like project undertaken by the recipient or consideration which would be income of the recipient chargeable under the head "Salaries
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tech techni nica call con consu sult ltan ants ts
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inte interi rior or dec deco orato rators rs
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mana manage geri rial al cons consul ulta tant ntss
tran transf sfer er of of the the right right to to manuf manufac actu ture re,, produce, or process any article or thing which is chargeable as capital gain
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recr recrui uitm tmen entt agen agenci cies es
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reimbursement of actual expenses, if forming part of the bill amount.
transfer of a right to carry on a business, which is chargeable under the head capital gain
Category
Definition
(C)" Royalty" means consideration (including any lum sum consideration but excluding any consideration which would be the income of the recipient chargeable under the head' Capital gain') for:
(i)
the transfer of all or any right (including the granting of a license) in respect of a patent, invention, model, design, secret formula or process or trade mark or similar property;
(ii)
the imparting of any information concerning the working of, or use of, a patent, invention, model, design, secret formula or process or trade mark or similar property;
(iii (iii))
the the use use of any any pate patent nt,, inv inven enti tion on,, model, design, secret formula or process or trade mark or similar property;
(iv)
the imparting of any information concerning technical, industrial, commercial or scientific knowledge, experience or skill;
(iva)
the use or right to use any industrial, commercial or scientific equipment.
(v)
the transfer of all rights (including the granting of a licence) in respect of any copyright, literary, artistic or scientific work including films or video tapes for use in connection with television or tapes for use in connection with radio broadcasting, but not including consideration for the sale, distribution or exhibition of cinematographic films; or
Illustrative list of expenditure covered (including as per CBDT Circulars)
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for copyrights, know-how, know-how, design .( Inserted)
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non-compete fee and exclusive rights
Illustrative list of expenditure excluded (including as per CBDT Circulars)
Category
Definition
(vi)
the rendering of any services in connection with the activities referred to in sub-clauses (i) to (v) above.
( D) " any sum referred in clause (va) of section 28 of the Income-tax Act" means any sum whether paid or payable, in cash or kind, under an agreement for:
(a) not carrying carrying out out any activity activity in in relation relation to any business ; or know-how, patent, (b) not sharing any know-how, copyright, trade mark, licence, franchise or any other business or commercial right of similar nature or information or technique likely to assist in the manufacture or processing of goods or provisions for services. However, any sum chargeable under the head capital gains would not be covered in the above definition.
Illustrative list of expenditure covered (including as per CBDT Circulars)
Illustrative list of expenditure excluded (including as per CBDT Circulars)
Notes: 1.
The list of items covered under under each section is only an illustrative list. In case of any doubt, we could could have a call to discuss discuss TDS implications.
2. Special rates of TDS apply on payments to non-residents taking into account the provisions of the Act and the applicable tax treaty. 3.
Payments for advertisement are subject to withholding tax implications as based on the purpose for which the payment payment is made: a.
194C i. Payment to an advertising agency / directly to print / electronic electronic media (payments to government agencies excluded from the scope of TDS) ii. Puttin Putting g up hoardi hoarding ng iii. Sponsorsh Sponsorship ip for debates, seminars seminars etc. held in educational educational institution institutions, s, associations associations etc. iv. iv. Advert Advertisem isement ent in souven souvenirs irs..
b.
194I i. Rent paid paid for a space space which is sub-le sub-lett for putting putting up a hoardi hoarding ng
4. As per CBDT, payment for hotel accommodation by a company, whether in the nature of lease and license agreements is covered under the section 194I, if such accommodation is taken on a ‘re gular basis’. Accordingly, Accordingly, following payments shall not be covered under this section: a.
Payment by an employee directly to a hotel, as and when he stays there, which shall be reimbursed to him by his his employer. employer.
b.
Corporate employers entering entering into agreements with hotels, with a view to to fix the tariff rates, which are in the nature of rate contract agreements.
(The above chart considers the view expressed b y CBDT in its circulars. In certain case s, the CBDT view may not be the correct view & an ass essee can depart from the CBDT view. However, this may result in litigation. In case there are any items of expenditure, where VW / payee feel that TDS is not attracted, then we could discuss this over a call).
