12 May 2015
Whether we will have to pay service tax @ 12.36% on sitting fees payable to non-executive directors of a private limied company. As per the Company's Act of September 2013, each and every non-executive director can be paid Rs 1,00,000/= per meeting i.e. to say each and every director can be paid Rs. 4,00,000/= per annum on account of sitting fees as against which tds shall be deducted and paid u/s 194-J @ 10%. Now the question arises whether the company will have to pay service tax also @ 12.36%
as per my knowledge, this can be solution to your query:-
TDS Applicability:- Any person,who is responsible for paying to a resident any sum by way of any remuneration or fees or commission by whatever name called, other than those on which tax is deductible under section 192, to a director of a company, shall, at the time of credit of such sum to the account of the payee or at the time of payment thereof in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to 29[ten] per cent of such sum as income-tax on income comprised therein. So TDS provisions is applicable on Sitting fees.
Service Tax applicability:- The Ministry of Finance (Department of Revenue) vide its notification number 45/20121 dated August 7, 2012 directed that the service tax payable on the sitting fees/commission of the directors are to be paid by the company. In other words, the company as the receiver of the service that has been rendered service by the director will bear the liability of the service tax payable for such service received by the company. Thus, the tax is to be paid on the “reverse charge basis”.
Correct me, if i am wrong or there is any other solution.
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