25 November 2011
we are offering a car as gift for completing a sale target given to agent/networker.this person receives commission from us for sale on which we deduct tds and we gave him target to complete the targeted sale and offering a car. we will pay ex-showroom price of car directly to car agency and local taxes and other expenses will be borne by agent himself.
whether this car to be treated as commission or as gift please advice me regarding tds applicability or any other tax implication on this transaction.
25 November 2011
i have recieved following reply on this query from other section. please suggest.
The Company may make Gifts to its employess & concerned persons. It is a GIft, No TDS to be deducted by the Company AND no Income Tax will be paid by the Receiver [ Donee] as CAR [ Gift in kinds ] does come under the category of PROPERTY u/s 56(2) of the I T Act.
But if the CAR is considered as Commission Paid/Payable, TDS is required to be deducted u/s 194G of the I t Act and the Cost price of the Car will be added to the total Income of the receipient of Car
28 November 2011
Section 194G deals in : COMMISSION, ETC., ON THE SALE OF LOTTERY TICKETS.
Any person who is responsible for paying, on or after the 1st day of October, 1991 to any person, who is or has been stocking, distributing, purchasing or selling lottery tickets, any income by way of commission, remuneration or prize (by whatever name called) on such tickets in an amount exceeding one thousand rupees, shall, at the time of credit of such income to the account of the payee or at the time of payment of such income in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rate of ten per cent.
THEREFORE I WOULD NOT AGREE TO TREAT THIS UNDER SECTION 194G......RATHER 194H IS MORE APPROPRIATE.
28 November 2011
Now, onto your second confusion : whether or not this can be treated as Gift (tax free) ?
I have replied on the basis of your query.
Gifts to staff is very much justified. Further, smaller gifts does get accepted without any hitch on the principle of materiality. However, a gift of car to a person (directly related to your business), warrant certain questions & you need to justify the same, if a question is raised.
Further, keeping the exact circumstances that you have mentioned, the correct treatment would be as "Commission"
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