I am a sole data entry service provider in Gandhinagar and I am providing my data entry service to one company (say XYZ) in Gandhinagar itself. Rate of my service is on entry base, thus I am putting my bill like no. of entries done x Rate per entry Rs.xx/- = Total Rs.xxx/-
My monthly invoice will be around of Rs.20000/- per month. There isn't any written agreement/contract between me and the company XYZ.
Now they told me that they will deduct TDS. Is that true ? Should my service be liable for TDS ? If yes, then in which section my service will belong and at what rate TDS should be deducted.
Your services are classified as professional services even though you have entered into contract or not. You cannot be considered as contractor considering the nature of services.
Further, since your payment is more than 30000 per annum, tax is liable to be deducted @ 10% under section 194J of the income tax act.
If the company does not deduct tax, it will not be allowed to claim your fees as deduction in its expenses and will be liable for disallowance.
Accordingly, company is correct and it will deduct TDS @ 10% for your services.
U can file the return and availe the tax credit for the tax deducted by the company in your return of income.
17 February 2012
Thanks Mr. Jinesh for your kind feedback. Though there are still some debate over 194C vs. 194J even in caclub alos, I do believe in your suggestion.
In addition to this suppose I register a sole proprietorship firm and I appoint 2 or 3 persons as a data entry operator and then if I raise the bill with the name of registered firm. Then in which section our services will be classified - 194C or 194J?
194C and 194J debate is over the nature of services and not the method of billing. Your services fall under the category of professional services as i mentioned earlier.
Usually a contractor is the one who does not himself engaged into rendering any kind of professional services.
194C is generic and 194J is specific section and as a rule specific section prevails over general section.
Accordingly, 10% tax is likely to be deducted. Trust your doubts are resolved.
19 February 2012
Thanks Mr. Jinesh for your kind attention and for your genuine advice.
So, shall I have to furnish any type of book-keeping from CA to avail the tax credit by returning the file, or attaching of raised invoices with the income tax-return will be sufficient. I do not have any type of registration, and I think it is not required for data-entry service provider. Please advice.
20 February 2012
No need to attach anything.. company will give u form 16 for the tax deducted. claim that tax credit in your return. verify your tax credit in 26AS on nsdl site. upload your return electronically and u ll get the refund for the same as per your computation of income and tax liability..
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