TDS on Music Rights

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Mukesh Kumar (Querist)
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01 November 2010 Hi everyone..
Greetings of this festive season.

I am making a TV ad commercial and I have to use one Movie song in this ad. I want to know about the TDS on its music rights for which I am paying.
Is there I have to deduct Tax u/s 194J @ 10% [ Royalty ].

Ajay Mishra

Ajay Mishra (Expert)
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01 November 2010 Dear Friend
Ad services is covered under section 194c and not under 194J, becase for making advertisement you should made a contract with music company for availing music rights.
Under the Indian Income Tax Act, the following provisions relate to the Tax Deduction at Source from payments to Contractors and Subcontractors under section 194C.
• Person responsible for paying any sum for carrying any work to any resident contractor should deduct tax at source.

• Tax should be deducted at source only if the contract is between the contractor and the following specified persons:
1. The Central Government or any State Government.
2. Any local authority.
3. Any corporation established by or under a Central, State or Provincial Act
4. A company
5. Any Co-operative Society.
6. Any authority, constituted in India by or under any law, engaged either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both.
7. Any Society registered under the Societies Registration Act, 1960 or any law corresponding to that Act in any part of India.
8. Any Trust.
9. Any University established by or under any Central, State or Provincial Act or any institution declared to be a University under the University Grants Commission Act.
10. Any firm.
11. Any individual or Hindu Undivided Family whose books are required to be audited under section 44AB during the immediately preceding financial year. [The turnover from business/profession exceeds the limits specified u/s 44AB during the immediately preceding financial year].
12. Association of persons or Body of Individuals, whether incorporated or not, whose books are required to be audited under section 44AB during the immediately preceding financial year.

Important Note: As per section 206AA, with effect from 1.4.2010, every person who receives income subject to TDS under chapter XVIIB (covers all TDS cases) shall furnish to the deductor, his PAN. If PAN is not so furnished, the rate of TDS will be at the rates specified in the Act or at the rates currently in force or at 20% whichever is higher. Please note that this applies to non residents also.

Individual or HUF need not deduct tax if the contract is exclusively for personal purposes.

• Income Tax should be deducted at the time of payment or credit to the account of the contractor whichever is earlier.

• Income Tax is to be deducted at source @ 1% if the contractor/sub contractor payee is an individual or HUF. Payment of amounts to persons other than Individual/HUF would attract TDS rate of 2%.

• Provisions of Section 194C are applicable only where the contract is either a “contract for carrying out any work” or a “contract for supply of labour for works contract”. Hence, these provisions are not applicable for payments made under the contract of sale of goods.

For the purpose of this section, the following contracts are also included in the scope of “Work”:

1. Advertising.
2. Broadcasting and telecasting including production of programs for broadcasting and telecasting.
3. Carriage of goods and passengers by any mode of transport other than Railways.
4. Catering.
5. Manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer.
but does not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer.

Regards

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