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Should i deduct tds for providing service or not

Abhinav Saraswat (4 Points)

23 November 2015

I have a website for booking appointments for salons.

This is the process of transaction:-

User pays amount on our website.Which goes to our account.
I have deduct commission from this amount and transfer remaining amount to salon.
So do I have to deduct the TDS before transferring the amount or not?
What will be the process?

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4 Replies

Karthik.V.Kulkarni (Chartered Accountant) (594 Points)
Replied 24 November 2015

Yes, the said service will amount to contract under the income tax act. There fore you have to deduct tds u/s 194 c. But there is a grey area in this matter a work used for personal purpose is not liable to tds if the the payer is individual. So here there arises a doubt whether the services provided by saloon is direcrtly to u or to individuals. So i would suggest you get a legal opinion on the same, as this is same like ola or uber which is termed as aggregators. So i think we would be of no help, you have to get a written opinion un this matter from a CA because the said matter is litigative and debatable.

CA Prateek Garg (CA in Practice) (1444 Points)
Replied 25 November 2015

There are 2 different payment flow in above transaction.

1. Payment of net amount (after deduction of Commission) to salon.

2. Retention of commission amount by You.

No Provision of TDS is applicable on 1st type of payment i.e. payment of Net amount to salon

In case of Commission retained by you 194H whould apply but here you are the earner of income and actual expenditure is of salon. Hence no liability of TDS on your part. Liability is on respective salon.

CA Goutam Sharma (Chartered Accountant in Practice) (468 Points)
Replied 25 November 2015

No there is no Liability to deduct TDS by you from the commission you keep with yourself except if the salons are so required to deduct TDS from commission.

However, you fall in the trap of service tax on the value of commission you keep with yourself as an Aggregator

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CA Goutam Sharma (Chartered Accountant in Practice) (468 Points)
Replied 25 November 2015

E filer,

plese refer the text of Act carefully, The TDS is required to be deducted by the person responsible for paying. It nowhere states person actually paying. further, in all such cases where the agent keeps his commission and pay the net amount to principle, the tax is required to be deposited by principle provided the principle is covered under provision of TDS. in this regard, refer Circular No 619 of 4/12/1991