Tds on tips
This query is : Resolved
19 December 2012
we are enganged in hotel industries. we got tips of rs550000 in foerign currency.and we disburesh it between employees after some days.sec 195 is applicable or not.weather it is income or not for us.
Soumitra Basu
(Expert)
19 December 2012
neither it will be income in your hand nor any tds has to be deducted.
CA Roshan Jha
(Expert)
19 December 2012
In my opinion, this will be taxable in your hand. Any tip directly collected by the waiter shall be his personal income. However if the tip is collected by the hotel and later on disbursed among the employees, than it is merely application of income.
20 December 2012
tips is not collected by them. it is collected by hotel and after some interval we distribute it between the all employees of hotel.
now suggest me wheather we would deduct tax u/s192 salaries
now suggest me wheather we would deduct tax u/s192 salaries
CA Roshan Jha
(Expert)
20 December 2012
As said earlier,in my opinion if the tips is collected by hotel, than it is the income of hotel. Disbursement amongst the employees is merely application of income. Hence no Tds to be deducted.
Soumitra Basu
(Expert)
20 December 2012
TIPS IN ANY WAY CANNOT BE THE INCOME OF HOTEL. IT HAS NO RELATION WITH THE BUSINESS.
CA Roshan Jha
(Expert)
20 December 2012
Sorry for the mistake. The income is taxable in the hands of employees and Tds has to be deducted by the hotel. For your reference go through the following recent case:
Do the tips collected by hotel and disbursed to employees constitute salary to attract the provisions for tax deduction at source under section 192?
CIT (TDS) v. ITC Ltd [2011] (Del.)
Yes. As soon as such amounts were received by the employer, there was an obligation on the part of the employer to disburse them to the rightful persons, namely, the employees. Simultaneously, a right accrued to the employees to claim the tips from the employer. The High Court, therefore, held that the tips would constitute income within the meaning of section 2(24) and thus, taxable under section 15. It was obligatory upon the company to deduct tax at source from such payments under section 192.
Additionally interest under section 201(1A) is mandatory in case of non deduction. Since the payment of interest under that provision is not penal, no question of waiver of such interest even if the default was not intentional.
Do the tips collected by hotel and disbursed to employees constitute salary to attract the provisions for tax deduction at source under section 192?
CIT (TDS) v. ITC Ltd [2011] (Del.)
Yes. As soon as such amounts were received by the employer, there was an obligation on the part of the employer to disburse them to the rightful persons, namely, the employees. Simultaneously, a right accrued to the employees to claim the tips from the employer. The High Court, therefore, held that the tips would constitute income within the meaning of section 2(24) and thus, taxable under section 15. It was obligatory upon the company to deduct tax at source from such payments under section 192.
Additionally interest under section 201(1A) is mandatory in case of non deduction. Since the payment of interest under that provision is not penal, no question of waiver of such interest even if the default was not intentional.
21 December 2012
in present we are not deducting tax. what will be the consequences
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