If I hire a sales rep on commission only basis without any base pay, should i deduct TDS monthly?

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3 Points Joined December 2024

If I hire a sales rep on commission only basis without any base pay, will that person be considered as full time employee or contract? is this allowed to have employee without a base pay? should i deduct TDS monthly when paying at the end of the month? please advise

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On 17 December 2024 at 13:54 Report
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Master in Accounts & high court Advocate
8972 Points Joined December 2011

 In India, the employment status of a commission-only sales representative can be either:

 1. *Employee*: If the individual works exclusively for your organization, has a fixed schedule, and is subject to your control and supervision, they may be considered an employee.

2. *Contractor/Consultant*: If the individual works on a freelance or contract basis, has flexibility in their schedule, and is responsible for their own expenses, they may be considered a contractor or consultant. Regarding the payment structure: -

*Allowed to have employee without base pay*: Yes, it is allowed to hire employees on a commission-only basis without a base pay.

However, you must ensure compliance with labor laws and regulations. - *Minimum Wages Act*: You must comply with the Minimum Wages Act, which mandates minimum wages for certain employees.

Although commission-only employees might be exempt, it's essential to review the specific regulations applicable to your business. Tax Implications: -

 *TDS on Commission Payments*: As an employer, you are required to deduct TDS on commission payments made to your sales representatives.

The TDS rate is typically 5% for residents and 20% for non-residents. -

 *Monthly TDS Deduction*: You should deduct TDS on a monthly basis, as the tax liability arises at the time of payment.

You can adjust the TDS amount at the end of the quarter, if necessary. To ensure compliance with labor laws and tax regulations, consider the following: - *Employment Contract

*: Draft a comprehensive employment contract outlining the terms and conditions, including the commission-only payment structure. - *Labor Law Compliance*: Verify compliance with relevant labor laws, such as the Minimum Wages Act, Payment of Wages Act, and others. - *TDS Compliance*:

 Ensure timely TDS deduction and deposit, and maintain accurate records of TDS compliance. Consult with a tax professional, labor law expert, or attorney to ensure you comply with all applicable laws and regulations.

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On 17 December 2024 at 15:19
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3 Points Joined December 2024

thanks a lot sir, for the detailed explanation, it clarified my doubts

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On 17 December 2024 at 16:21
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CA
603 Points Joined March 2007

Dear Sir, You can deduct TDS under Section 194J @ 10% to avoid confusion and deducting under multiple sections.

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On 13 January 2025 at 16:26


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