Commission to employee (service tax)

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CA. Rohit Vishambhari, Vns.

Chartered Accountant

136 Points Posted on 17 September 2012

Where the salary which is to be paid to the employee is fully variable and to be determined based on certain fixed perchantage of turnover and no fixed salary will be paid to him.

In this case, whether the service tax liability will be on the employee, if the total amount of variable salary to be received by him exceeds Rs. 10 Lacs in a financial year. Moreover, the employer is deducting the tax at source U/s. 194H of the Income Tax Act,1961.

Kindly advise on the service tax liability on the above.

Thanks,

Replies (3)

Giridhar S Karandikar

Team Lead

5675 Points Posted on 18 September 2012

As per section 17 of the I-T Act salary paid to an employee includes bonus, fees, commission. If tehre is an employee employer relatinoship, co is issuing Form16 to the employee then TDS on commision paid to teh employee will be made on slab rates as applicbale to employee & not @ 10% u/s 194H.

If the employee is in the 30% tax bracket & the co is deducting tax @ 10% then it is undercutting the TDS.

So I think that the TDS shud be made u/s192 on slab rates & not u/s 194H.

CA Amar kant kushwaha

Consultant

51 Points Posted on 18 September 2012

Originally posted by : CA. Rohit Vishambhari, Vns.

Dear Mr. Rohit,

If it is clear that there is an employer employee relationship exist between them, than there is no question about the service tax liability. and it is moreover depend on the nature and manner of of the work done by employee. so please provide more clarity about the work done by employee.

Further, as per sec.17 of income tax act, salary can be in the form of bonus, commission etc. than the TDS should be duducted u/s 192 and not u/s 194H.