03 November 2007
Scope and meaning of ‘advertising’ - Regarding the scope and meaning of the term ‘advertising’ used in section 194C(1), it is clarified that advertising may be in print or electronic media, i.e., in newspapers, periodicals, radio, television, etc. In such cases, tax will be deducted at the rate of 1 per cent of the payment made for advertising including production of programmes for such broadcasting and telecasting to be used in such advertising. In all other cases of work of broadcasting and telecasting including production of programmes for such broadcasting and telecasting, where advertising is not involved, tax will be deducted at the rate of 2 per cent of the sum—Circular : No. 714, dated 3-8-1995.
Clarifications on advertising contracts - The following clarifications need be noted :
- As to the scope of an advertising contract for the purpose of section 194C, the term ‘advertising’ has not been defined in the Act. During the course of consideration of the Finance Bill, 1995, the Finance Minister clarified on the floor of the House that the amended provisions of tax deduction at source would apply when a client makes payment to an advertising agency and not when advertising agency makes payment to the media, which includes both print and electronic media. The deduction is required to be made at the rate of 1 per cent. When an advertising agency makes payments to their models, artists, photographers, etc., the tax shall be deducted at the rate of 5 per cent as applicable to fees for professional and technical services under section 194J of the Act.
- If the advertising agencies give a consolidated bill including charges for art work and other related jobs as well as payments made by them to media, the deduction will have to be made under section 194C at the rate of 1 per cent. The advertising agencies shall have to deduct tax at source at the rate of 5 per cent under section 194J while making payments to artists, actors, models, etc. If payments are made for production of programmes for the purpose of broadcasting and telecasting, these payments will be subject to TDS at 2 per cent. Even if the production of such programmes is for the purpose of preparing advertisement material, not for immediate advertising, the payment will be subject to TDS at the rate of 2 per cent.
- The payments made directly to print and electronic media would be covered under section 194C as these are in the nature of payments for purpose of advertising. Deduction will have to be made at the rate of 1 per cent. However, the payments made directly to Doordarshan may not be subjected to TDS as Doordarshan, being a Government agency, is not liable to income-tax.
- The contract for putting up a hoarding is in the nature of advertising contract and provisions of section 194C would be applicable. However, if a person has taken a particular space on rent and thereafter sublets the same fully or in part for putting up a hoarding, he would be liable to TDS under section 194-I and not under section 194C. In the case of advertising contracts, tax is to be deducted at the rate of 1 per cent of the gross amount of the bill (including bill of media), and not on that portion of commission paid to the person who arranges release of advertisement, etc.
- In the case of sponsorship for debates, seminars and other functions held in colleges, schools and associations with a view to earn publicity through display of banners, etc., put up by the organisers, the agreement of sponsorship is in essence an agreement for carrying out a work of advertisement. Therefore, provisions of section 194C will apply.
- Tax is deductible at source on payments for costs of advertisements issued in the souvenirs brought out by various organisations—Circular No. 715, dated 8-8-1995