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TDS on payment to travelling agent

Adhiswar varshney (student.) (200 Points)

14 December 2010

Hay Every Body

I want to know whether the tds should be deducted for payment made to Travelling agent for booking ticket of Rail ticket of companies employees.

If tds is applicable what sectiion would be? & what should be amount for application of tds either full amount (serrvice charge plus ticket value)or only service charge.

Thanks in advance

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5 Replies

Devendra (Chartered Accountant) (4775 Points)
Replied 14 December 2010

Dear Adhiswar,

1) Yes. TDS is liable to be deducted on payment made towards ticket booking. TDS is to be deducted on commission charged by the travel agent for booking ticket u/s 194H.

2) TDS u/s 194H is to be deducted @ 10% if the commission exceeds Rs. 5000.

3) TDS is to be deducted only on the amount of service charged by the agent. There is no need to deduct TDS on the Railway Ticket

Regards,

Devendra P Kulkarni

1 Like

mithun (CA) (107 Points)
Replied 04 November 2011

Payment To Travel Agents for AirLine Tickets :Tds applicable or not?

query before us is
whether tds should be deducted u/s 194C for payment made to travel agent for booking of airline tickets by a company for its employee(s)?

Many of my friend reader flying daily and may be interested in the above question,The possible section under which it can be covered are

Section 194C because there is a contract of service
Section 194H as it covers commission

I-whether it covers u/s 194C?

The following general conditions should be satisfied for a payment to qualify for deduction of tax u/s 194C

1.Payee:The contract should be entered by the following specific person

Central government
state govt or Local authority
Cent or State Corp. covered estb. under Cent./state act
Any co-operative society
Any company
Any authority constituted In India under or b the law for town planning and other specific work as defined
any society
any Trust
any firm
any University with specific conditions
Societies register under the specific acts
any firm
any HUF?individual if turnover exceeding 40lacs or profession receipt exceeds 10lakh in immediate preceding year
from 01.06.2008 any AOP /BOI

2.payer

Resident contractor
payment to subcontractor by resident contractor

3.work

contract between payer and payee for carrying out any work
Including supply of labour for carrying out any work.

So in general three basic genral condition should be fulfilled to make a payment eligible for deduction of tax at source u/s 194C.Generally we conclude that there is contract so tds should be dudcted u/s 194 C but this is not the legal position , if any one of above three content/condition is missing ,then section 194C will not be applicable.

so where the contract is between contractor and Huf or individual for personal purpose it will not be covered under section 194C and tax will not be deductible.

In this case ,payment to travel agent for booking of airline tickets ,the contract is between individual and airline company though payment is made by the company so tds is not deductible.

CBDT Clarificatary circular:

CBDT has issued a detailed circular no 715 on tds u/s 194C,194I and 194J dated 8.8.1995 ,In which 34 question has been dealt .In this circular question number 6 relates to payment made to travel agent/airline for booking of tickets ,It has been clarified in the circular that notwithstanding the payment has been made by the payee list mentioned as above ,but the contract of purchasing the ticket is between individual passenger and the airline/travel agent ,so tax should not be deducted.

the relevant part of the circular is reproduced here under for your ready reference

Question 6 : Whether payment under a contract for carriage of goods or passengers by any mode of transport would include payment made to a travel agent for purchase of a ticket or payment made to a clearing and forwarding agent for carriage of goods ?

Answer : The payments made to a travel agent or an airline for purchase of a ticket for travel would not be subjected to tax deduction at source as the privity of the contract is between the individual passenger and the airline/travel agent, notwithstanding the fact that the payment is made by an entity mentioned in section 194C(1). The provision of section 194C shall, however, apply when a plane or a bus or any other mode of transport is chartered by one of the entities mentioned in section 194C of the Act. As regards payments made to clearing and forwarding agent for carriage of goods, the same shall be subjected to tax deduction at source under section 194C of the Act.

hence the No tax should be deducted u/s 194C on payment made to travel agent/airline for booking of tickets.This rule is also applicable on other transport medium like rail booking also.

II-TDS on commission payable to airline travel agent is deductible under section 194H?

Ans:After carefully going through the query we have ,I have note following main points

Travel agent is working for commission
Travel agent work as agent between airline company and passenger
Travel agent either retain commission and transfer balance money to airline company or transfer full amount and get commission from airline.

Now as per section 194 H

section provides for deduction of tax at source on any income by way of commission or brokerage by the payer to payee
The meaning of payer here is in my opinion is principle and payee agent
while purchasing the air ticket the payer is airline company and payee is travel agent and person who is purchasing ticket is not payer as he is not paying any commission as such to the airline ticket
so u/s 194 H in my opinion ,airline company is liable to deduct tax from the travel agent as they falls under the definition of payer and paying commission to the agent.
circular no 619 dated 04.12.1991,para no -6(this relevant because the section 194H has been reintroduced again in 2001 but existed earlier also)says the Following
6. A question may raise whether there would be deduction of tax at source under section 194H where commission or brokerage is retained by the consignee/agent and not remitted to the consignor/principal while remitting the sale consideration. It may be clarified that since the retention of commission by the consignee/agent amounts to constructive payment of the same to him by the consignor/principal, deduction of tax at source is required to be made from the amount of commission. Therefore, the consignor/principal will have to deposit the tax deductible on the amount of commission income to the credit of the Central Government..................
so even the travel agent used to retain their commission from gross payment, its airline responsibility to deduct and deposit tds from the commission

so from the above ,it may be concluded or in my opinion the airline company is responsible for deducting tax u/s 194H ,not the person who is purchasing the ticket, as the commission is being paid by the airline company to travel agent ,not by the passenger.

jonesmith (MD) (28 Points)
Replied 04 November 2011

If I ever work for anyone again (doubtful) I would NEVER in a million years accept group health insurance. Pay me the money. I'll buy my own insurance.

People get trapped into jobs and have to pass on better opportunities because they are stuck in a group health plan.

VINOD (ARTICLE STUDENT) (21 Points)
Replied 26 November 2011

Dear sir,

I Have hired taxi for my business, and used for direct business and the total amount paid from April 2011 to Nov 2011. is Rs 120000/- .

Sir, do i have to deducte the TDS on the Taxi bills. as per sec 194C,

And i have travelled to Uk for my business purpose and i had booked the Air ticket and Hotel for Rs 250000/- do i have to deduct the TDS.

Regards

Vinodgarg

mithun (CA) (107 Points)
Replied 28 November 2011

As you have paid120000 to taxi so u need to deduct tds on contract at 2 percent coz single bill 30000 and in aggregate 75000 then u need to deduct tds. For air ticket no need to deduct tds on air fare but the charges charged by the agent on ticket called as transaction charges need to deduct on that amount if it exceeds 30000 for single bill and 75000 in aggregate anx the same with hotel bill