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TDS on Internet Service Provider

CA Amit Jaiswal (Finance Manager) (2720 Points)

22 July 2011

Hi,
Can anyone tell me under which section and at what rate the TDS is to be deducted for Payment to Internet Service Providers

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5 Replies

Ranjan Dayal (Professional) (275 Points)
Replied 22 July 2011

U/s 194J @ 10%

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CA Deepak Kumar (Chartered Accountant) (415 Points)
Replied 23 April 2017

The common question that arises for many of them is whether TDS is applicable on Internet charges, Telephone Charges, Cable TV, Leased lines, etc. Some say it is applicable for leased lines, and some say it is not applicable to Internet charges, Telephone Charges, Cable TV, Leased lines. Don’t get confused, just read this complete article to get a clarity about which section does it belong to & if it is applicable then what is the maximum exemption limit?

Is TDS applicable on Internet Charges and Telephone Charges?

As per section 194J, the TDS (Tax Deduction at Source) is applicable on fees for professional or technical services. It does not cover the charges paid by the average consumer or householder for utilizing the products of modern technology, such as the use of the cable TV, the telephone fixed or mobile, the internet, the railway, the automobile, consumption of electrical energy, the aeroplane, etc. Such facilities which when used by individuals are not considered as technical service. It applies to any subscriber, i.e., the subscriber may be Individual, Company or Firm.

In brief, the TDS is not applicable on Internet Charges, Telephone Charges, Cable TV, etc.

Is TDS applicable on Internet Leased line?

As per Section 194C, the TDS is allowable on payments to contractors or sub-contractors. As per some CA experts opinion, the Deduction of tax at source can be applicable on Leased lines under section 194C.

Another expert said that “The internet doesn’t fall under the IT (Information Technology) or Technical Consultancy as it includes only software’s and Training Etc. It won’t come under 194C because there is no specific contract. So, there is no need to deduct TDS for the Internet under any Section.” But as leased line is not in the nature of fees for technical services, the TDS is not applicable on Leased lines

The final conclusion is that as leased line is not in the nature of fees for technical services, the TDS is not applicable on Leased lines. However, it is better to consult your CA expert and confirm as rules may change every year.