Taxation impact
This query is : Resolved
20 December 2013
Hi Sir
We are organizing an event,which is non profitable for the company.We are getting sponsorship money for the event from the various Corporate.We are just organizing this event and we are not making any profit for our company.Now my clarification is what will be tax impact while we will raise invoice to the sponsor.
Your clarification on this will be highly appreciated.
Thanks
Sandipon
We are organizing an event,which is non profitable for the company.We are getting sponsorship money for the event from the various Corporate.We are just organizing this event and we are not making any profit for our company.Now my clarification is what will be tax impact while we will raise invoice to the sponsor.
Your clarification on this will be highly appreciated.
Thanks
Sandipon
23 December 2013
it doesnt matter friend. It would still get included in your income. But it doesn't impact the taxation as you should be able to claim the corresponding expenses resulting in nil impact on taxable income.
23 December 2013
Thanks a ton..Can you clarify on the following queries ??
1. Should we need to collect the service tax (12.36%) from the service receiver (Sponsor)?
2.I believe TDS will be 2%, is it correct?
Thanks in advance for your clarification.
1. Should we need to collect the service tax (12.36%) from the service receiver (Sponsor)?
2.I believe TDS will be 2%, is it correct?
Thanks in advance for your clarification.
26 July 2025
Certainly, Sandipon. Let's clarify each of your queries step by step regarding **taxation on sponsorship receipts**, especially in the context of **organizing a non-profit event**:
---
## 🔹 1. **Should you charge Service Tax on Sponsorship Income?**
Since your query is dated **December 2013**, **Service Tax laws were applicable at that time** (pre-GST era).
### ✅ **Answer: Yes, service tax is applicable on sponsorship services**
As per **Section 65(105)(zzzm)** of the Finance Act, 1994 (applicable at that time), **sponsorship services (other than sponsorship of sports events)** were taxable services.
So, even if:
* The event is non-profit, and
* The sponsorship is just support for organizing the event,
You **must charge Service Tax @12.36%** (applicable rate in 2013) on the invoice raised to the sponsor.
> 💡 **Exception:** Sponsorship of sports events was **exempt**. If it’s not a sports event, tax applies.
---
## 🔹 2. **Is TDS applicable on the payment by the sponsor?**
### ✅ **Yes, TDS is applicable under Section 194C of the Income Tax Act**
Since you are providing a service (event organization in exchange for sponsorship benefits), **the sponsor (payer)** is required to deduct **TDS @ 2%** (in case your firm is not an individual/HUF) **or 1%** (if individual/HUF contractor).
* TDS is **deducted on the gross amount** (including service tax).
* You can **claim credit** for the TDS while filing your income tax return.
---
## 🔹 3. **Even if the event is non-profit, will income tax apply?**
### ✅ **Yes, sponsorship income is taxable business income**
Even if you're not making profit:
* Sponsorship receipts are **business income**.
* You can **claim all related expenses** (venue, printing, promotion, catering, etc.)
* If **net profit = 0 or negative**, **no income tax** liability arises.
But still, **you must show this activity in your books of account** and file returns accordingly.
---
### ✅ **Summary:**
| Component | Tax Treatment |
| ------------------------------ | -------------------------------------------- |
| **Service Tax** | Chargeable @12.36% on sponsorship invoice |
| **TDS by sponsor** | Yes, u/s 194C @ 2% or 1% |
| **Income Tax** | Applicable on net profit (income – expenses) |
| **Non-profit nature of event** | No exemption from above taxes |
---
If this event were organized **after July 1, 2017**, **GST** would apply instead of service tax.
Let me know if you want a **sample invoice format** or how to account this in your books.
---
## 🔹 1. **Should you charge Service Tax on Sponsorship Income?**
Since your query is dated **December 2013**, **Service Tax laws were applicable at that time** (pre-GST era).
### ✅ **Answer: Yes, service tax is applicable on sponsorship services**
As per **Section 65(105)(zzzm)** of the Finance Act, 1994 (applicable at that time), **sponsorship services (other than sponsorship of sports events)** were taxable services.
So, even if:
* The event is non-profit, and
* The sponsorship is just support for organizing the event,
You **must charge Service Tax @12.36%** (applicable rate in 2013) on the invoice raised to the sponsor.
> 💡 **Exception:** Sponsorship of sports events was **exempt**. If it’s not a sports event, tax applies.
---
## 🔹 2. **Is TDS applicable on the payment by the sponsor?**
### ✅ **Yes, TDS is applicable under Section 194C of the Income Tax Act**
Since you are providing a service (event organization in exchange for sponsorship benefits), **the sponsor (payer)** is required to deduct **TDS @ 2%** (in case your firm is not an individual/HUF) **or 1%** (if individual/HUF contractor).
* TDS is **deducted on the gross amount** (including service tax).
* You can **claim credit** for the TDS while filing your income tax return.
---
## 🔹 3. **Even if the event is non-profit, will income tax apply?**
### ✅ **Yes, sponsorship income is taxable business income**
Even if you're not making profit:
* Sponsorship receipts are **business income**.
* You can **claim all related expenses** (venue, printing, promotion, catering, etc.)
* If **net profit = 0 or negative**, **no income tax** liability arises.
But still, **you must show this activity in your books of account** and file returns accordingly.
---
### ✅ **Summary:**
| Component | Tax Treatment |
| ------------------------------ | -------------------------------------------- |
| **Service Tax** | Chargeable @12.36% on sponsorship invoice |
| **TDS by sponsor** | Yes, u/s 194C @ 2% or 1% |
| **Income Tax** | Applicable on net profit (income – expenses) |
| **Non-profit nature of event** | No exemption from above taxes |
---
If this event were organized **after July 1, 2017**, **GST** would apply instead of service tax.
Let me know if you want a **sample invoice format** or how to account this in your books.
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